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Proceedings  of  the  National 
Conference 


ON 


Trusts  and  Combinations 

Under  the  Auspices  of 

The  National  Civic  Federation 

Chicago,  October  22-25,  1907 


NEW  YORK 

NATIONAL  CIVIC  FEDERATION 

1908 


Iv-r'.-^r"."--' 

v     .v  .  ;■■ 


Proceedings  of  the  National 
Conference 


ON 


Trusts  and  Combinations 

Under  the  Auspices  of 

The  National  Civic  Federation 

Chicago,  October  22-25,  1907 


NEW  YORK 

NATIONAL  CIVIC  FEDERATION 

1908 


£>299 


Printed  by 

THE  McCONNELL  PRINTING  CO. 

230-242  William  Street 

New  Yor.k 


2,7  S3 

A3 
I  <3<Df 


TABLE  OF  CONTENTS 

PAGE. 

Introduction    9 

Committee    on    Arrangements 15 

Official  List  of  Delegates 17 

PROCEEDINGS  OF  THE  CONFERENCE. 

First  Session,  October  22,  10  A.  M. 

Chairman  :    Dr.  Nicholas  Murray  Butler,  New  York. 

Introductory  Address,  "The  Problem  Before  the  Confer- 
ence," Dr.  Nicholas  Murray  Butler 35 

^    Committee  on  Rules  and  Order  of  Business  Authorized ....     40 
>     " Present  Principles  Enunciated  by  the  New  Organization  of 
Attorneys-General,"  Wade  H.  Ellis,  Attorney-General  of 

Ohio 41 

"State  and  Federal  Jurisdiction  Over  Interstate  Commerce," 
William  P.  Borland,  Attqrney-at-Law.  Kansas  City,  Mo.     57 
.    "Does  the  Power  to  Regulate  Rates  in   Transportation  of 
j*  Commerce   Rest    with    Congress   or   the    States?"    A.    T. 

J       Ankeny,  Attorney-at-Law,'  Minneapolis,  Minn 66 

J  "Conflict   between    Federal   and    State    Courts,"    David    P. 

X      Marum,  Attorney-at-Law,  Woodward,  Oklahoma 75 

^  Appointment  of  Committee  on  Rules  and  Order  of  Business.     83 

^  Second  Session,  October  22,  3  P.  M. 

Chairman  :    Dr.  Nicholas  Murray  Butler,  New  York. 

"Shall  Federal  Jurisdiction  Be  Extended  in  the  Solution  of 
the  Trust  Problem?"  John  W.  Tomlinson,  Attorney-at- 
.       Law,  Birmingham,  Ala 84 

"Remedies  for  Monopolies  and  Their  Results,"  William 
Dudley  Foulke,  Attorrjey^ju^J^w,  Richmond.  Ind 87 

"Governmental  Regulation,"  Theodore  Marburg,  Balti- 
more, Md 100 

"Uniform  Federal  and  State  Control  over  Interstate  Mat- 
ters," Charles  F.  Ziep.'old,  President  West  End  Business 
Merfs  Association.  St.  Louis.  Mo 107 

3 


327139 


PAGE. 

Report  of  Committee  on  Rules  and  Order  of  Business 114 

Discussion : 

Eugene  E.  Prussing,  Chicago,  111 117 

August  H.  Vogel,  Milwaukee,  Wis 118 

Wade  H.  Ellis,  Columbus,  Ohio 118 

Third  Session,  October  22,  8:15  P.  M. 
Chairman:   D.  A.  Tompkins,  North  Carolina. 

f  ^'National  Control  of  Railways,"  Seth  Low,  Publicist,  New 

York  City 121 

"Powers  of  the  State  and  Nation  Over  Corporations  and 
^    Trusts,   Bartlett  Tripp,   Attorney-at-Law,   Ex-Minister 

to  Austria,  Yankton,  S.  D 128 

"The  Farmers'  Interest  in  Trust  Regulation,"  Nahum  J. 
Bachelder,    Master   of   the    National    Grange,   Concord, 

N.  H 7 140 

Resolution  by  Nahum  J.  Bachelder,  New  Hampshire 144 

Discussion : 

Theodore  Marburg,  Baltimore,  Md 144 

Eugene  E.  Prussing,  Chicago,  111 144 

Fourth  Session,  October  23,  10  A.  M. 
Chairman:    Brooks  Adams,  Massachusetts. 

Letter  from  August  Belmont,  President  National  Civic 
Federation • .  •    H7 

"The  Trust  Situation,"  Jeremiah  W.  jENKS,\Professor  in 
Cornell  University,  Ithaca,  N.  Y 148 

Resolution  by  F.  A.  Derthick,  Ohio 157 

"The  Trust  Problem,"  Isaac  N.  SELiGMAN,\ganker,  New 
York 159 

"Destruction  or  Regulation,"  Edgar  A.  Bancroft,  Attorney- 
al-Law,  Chicago,  111 ^^^^^ 176 

"Over-capitalization,"  Irving  Fisher,  vProfessor  in  Yale 
University,  New  Haven,  Conn rl_z_LJ    19° 

"Trust  Philosophy  Boiled  Down,"  Frank  Parsons, VPro- 
fessor in  Boston  University,  Boston,  Mass 194 

"Corporations  as  Such,"  John  S.  Crosby,  Attorney-at-Law, 
New  York  City '. 198 

Appointment  of  Committee  on  Resolutions  Discussed 207 

4 


Fifth  Session,  October  23,  2  P.  M. 
Chairman  :    C.  P.  Walbridge,  Missouri. 

PAGE. 

"The  Enforcement  of  the  Sherman  Anti-Trust  Law," 
Frank  B.  Kellogg,  Special  United  States  Assistant  At> 
torney-General,  St.  Paul,  Minn 209 

Committee  on  Resolutions  Named 219 

"Anti-Trust  Laws,"  Peter  S.  Grosscup,  Judge  United 
States  Circuit  Court,  Chicago,  111 221 

''Corporate  Reforms,"  Eugene  E.   Prussing,  Attorney-at- 

Law,  Chicago,  111 231%  ^^ 

"Labor  Unions  and  Trusts,"  Samuel  Gompers,  President 
American  Federation  of\Labor,  Washington,  D.  C 245 

Resolution  by  Eugene  E.  Prussing,  Illinois 256*»/ 

Sixth  Session,  October  23,  8  P.  M. 
\^AiRMA^LL^Sasmic\ -  Gompers,  Washington,  D.  C. 

Telegram  from  C.  C.  McChord,  President  Association  of 
State  Railway  Commissioners 257 

"The  Sherman  Anti-Trust  Law,"  Charles  G.  Dawes, 
President  Central  Trust\Company,  Chicago,  111 257 

"The  Evils  of  CompetitioivTjRANGE  Sard,  Manufacturer, 
Albany,  N.  Y .T. ... .  .  .   267 

"Regulation  of  Transportation  Rates,"  Robert  Mather, 
Vice-President  Chicago,  Rock  Island  and  Pacific  \Rail- 
road,  New  York  City 272 

"Governmental  Regulation  of  Competitive  and  Monopolistic 
Corporations,"  Allen  Ripley  Foote,  Columbus,  Ohio...   278 

Resolution  by  Allen  Ripley  Foote,  Ohio 285 

Seventh  Session,  October  24,  10:30  A.  M. 
Chairman  :  Marcus  M.  Marks,  New  York. 

Resolution  by  John  W.  Tomlinson,  Alabama 287 

"Administrative  Regulation  of  Corporations,"  Herbert 
Knox  Smith,  Commissioner  of  Corporations,  Washing- 
ton, D.  C .        288 

"The  Railways  and  the  People,"  D.  A.  Tompkins,  \ Manu- 
facturer, Charlotte,  N.  C TTTTT.   298 

Committee  on  Finance  Appointed 302 

"Reasonable  Agreements  Beneficial  to  Commerce,"  William 
Jay  ScHiEFFELiN,\^Ierchant,  New  York  City 303 

5 


PAGE. 

Discussion : 

Thomas  V.   Wooten,   Illinois 316 

J.  Newton  Ninpe,  Illinois 317 

Charles  J.  Traxler,  Minnesota 319 

Henry  Othmer,  Illinois 331 

David  P.  Marum,  Oklahoma 332 

A.  T.  Stebbins,  Minnesota 336 

J.  E.  Defebaugh,  Illinois 336 

Resolutions  by 

S.  W.  Campbell,  Illinois 342 

G.  W.  Perkins,  Illinois 343 

George  W.  Lattimer,  Ohio 344 

"Newspapers,  Their  Relation  to  the  Paper  Trust  and  to  the 
Labor  Trust,"  Herman  Ripper,  VPr  opr  ietor  of  the  New 

Yorker  Staats-Zeitimg,  New  York  City 344 

"Federal  Incorporation/'  Henry  W.   Palmer,   Member  of 

Congress,  Wilkes-Barre,  Penna 351 

"The   American    Society   of   Equity   and    its   Need   in   Our 
Country,"  J.  A.  Everitt,  President  American  Society  of 

Equity   363 

Resolutions  by 

James  F.  Trattman,  Wisconsin 370 

P.  J.  Guerin,  Massachusetts 371 

J.  E.  Leavitt,  Massachusetts 371 

C.  J.  Traxler,  Minnesota 371 

P.  J.  Grosscup,  Illinois 372 

Avery  C.  Moore,  Idaho : 372 

Allen  Ripley  Foote,  Ohio 372 

F.  W.  Taussig,  Massachusetts 372 

On  behalf  of  West  Enp  Business  Men's  Associa- 
tion, St.  Louis,  Mo 2>7Z 

Eighth  Session,  October  24,  2:30  P.  M. 
Chairman  :    Marcus  M.  Marks,  New  York. 

"What  Next?"  F.  W.  Taussig,  Vrofessor  in  Harvard  Uni- 
versity,  Cambridge,   Mass 374 

Discussion : 

George  H.  Barbour,  Michigan 380 

Statement  from  Finance  Committee 383 

"The  Trust  Question  from  Labor's  Standpoint,"  Thomas 

6 


PAGE. 

Carl  Spelling,  Attorney-at-Law,  New  York  City 383 

Discussion : 

Warren  S.  Stone,  Ohio 392 

Avery  C.  Moore,  Idaho 394 

"The  English  Incorporation  Act,"  Hennen  Jennings, 
Washington,  D.  C 396 

"The  Relation  of  Industrial  Combinations  to  Export  Trade," 
James  H.  GoRE,\^rofessor  in  the  George  Washington  Uni- 
versity, Washington7~Dr  C 398 

"The  Adjustment  of  Labor  Problems  and  the  Policy  of  In- 
corporating Unions,"  D.  C.  Seitz,  New  York  City 4T2 

Discussion : 

James  Bingham,  Indiana 419 

Albert  Hibbert,  Massachusetts 420,  424 

J.  W.  Kinnear,  Pennsylvania 421 

Karl  Mathie,  Minnesota 422 

Theodore  Marburg,  Maryland 423 

Mahlon  N.  Kline,  Pennsylvania 424 

James  H.  Gore,  District  of  Columbia 425 

S.  Westerfield,  Illinois 426 

John  F.  Hogan,  Michigan 427 

Charles  W.  Needham,  District  of  Columbia 429 

Robert  Taylor,  Indiana 430 

Resolution  by  E.  Gaedzik,  Illinois 432 

Discussion : 

Thomas  Carl  Spelling,  New  York 433 

Ninth  Session,  October  25,  10  A.  M. 
Ctiairman  :    Seth  Low,  New  York. 

"Is  the  Tariff  the  Mother  of  the  Trusts?"  Byron  W.  Holt, 
N^merjcari-  Free  Trade  League,  New  York  City 435 

Discussion : 

Wilbur  F.  Wakeman,  New  York '.  .   445,  450 

Franklin  Pierce,  New  York 447 

Statement  for  Committee  on  Resolutions  by  Albert  Shaw, 
New  York,  Chairman 45 1 

Report  of  Committee  on  Resolutions 453 

Discussion  of  Report : 

Edward  E.  Bessette,  Illinois 456 

Samuel  Gompers,  District  of  Columbia 457 

7 


David  P.  Marum,  Oklahoma 457 

Marcus  M.  Marks,  New  York 458 

Talcott  Williams,  Pennsylvania 458 

Thomas  Carl  Spelling,  New  York 459 

J.  H.  Wallace,  Iowa 460 

J.  D.  McKinley,  Illinois 461 

P.  J.  Guerin,  Massachusetts 461 

D.  A.  Tompkins,  North  Carolina 462 

Wyndham  R.  Meredith,  Virginia 462 

Resolutions  Concerning : 

Printing  Proceedings 464 

Presentation  of  Resolutions  to  Congress 465 

Thanks  to  Officials  of  Conference 464,  465 

Adjournment 465 


INTRODUCTION. 

In  the  year  1899,  in  the  month  of  September,  the  Civic  Fed- 
eration of  Chicago  called  together  in  that  city  a  notable  gath- 
ering for  the  purpose  of  discussing  the  Trust  question.  The 
speakers  were  numerous  and  the  published  volume  of  the  pro- 
ceedings constitutes  a  singularly  full  and  complete  symposium 
of  the  then  current  opinion  on  the  subject.  So  diverse  are  the 
views  therein  expressed  that  it  seems  hardly  probable  that  any 
respectable  fraction  of  opinion  was  unrepresented.  But  the  key- 
note of  that  conference  was  diversity.  The  Committee  on  Res- 
olutions of  the  conference  made  an  earnest  effort  to  find  some 
common  ground  upon  which  all  could  stand,  and  failed  to  do  so. 
It  appeared  that  the  subject  was,  after  all,  too  new,  too  vaguely 
understood  for  men  to  be  of  one  mind  in  regard  to  it. 

But  what  could  not  be  accomplished  in  1899  might  be  pos- 
sible in  1907.  It  appeared  to  the  leaders  of  the  National  Civic 
Federation  not  improbable  that  a  new  conference  might  lead 
to  some  definite  pronouncement  of  opinion. 

Much  had  transpired  since  1899  to  keep  tne  Trust  question 
constantly  before  the  people.  The  flood  of  newspaper  and  mag- 
azine discussion  had  augmented  rather  than  diminished.  Both 
State  and  Federal  governments  in  a  series  of  legislative  and  ad- 
ministrative measures,  had  occupied  themselves  more  largely 
with  the  problems  of  combinations  and  allied  questions,  such  as 
those  pertaining  to  railroads.  Stimulated  by  executive  interest 
the  courts  had  rendered  a  series  of  important  decisions  dec- 
laratory of  the  scope  of  existing  law.  The  inquiries  of  the 
United  States  Industrial  Commission  had  for  the  first  time  dis- 
seminated widely,  and  with  the  seal  of  official  approval,  a  vast 
mass  of  information  regarding  trusts  and  combinations.  The 
creation  of  a  new  Department  of  Commerce  and  Labor,  and 


especially  the  establishment  of  the  Bureau  of  Corporations, 
gave  a  renewed  impetus  to  the  investigation  of  trusts  and  mo- 
nopolies, and  resulted  in  a  number  of  voluminous  and  compre- 
hensive reports,  which  have  attracted  widespread  interest.  The 
legal  proceedings  against  some  of  the  important  trusts  and 
the  evidence  brought  out  in  the  trials  have  been  to  many  a 
revelation  in  regard  to  modern  commercial  methods.  These 
are  only  a  few  of  the  events  which  in  recent  years  have  kept  the 
trust  question  in  the  forefront  of  public  interest,  and  which 
have  been  contributing  toward  the  formation  of  a  definite  pub- 
lic opinion. 

In  planning  a  national  conference  upon  this  subject  the  Na- 
tional Civic  Federation  sought  to  afford  an  opportunity  for  such 
public  opinion  to  crystallize  in  definite  form.  The  plan  met  with 
a  cordial  and  instantaneous  response.  Leaders  of  opinion  in 
all  walks  of  life  gave  the  project  their  hearty  endorsement.  A 
few  characteristic  passages  from  letters  expressing  approval  of 
the  plan  are  here  given: 

LYMAN  ABBOTT,  Editor  of  "The  Outlook": 

"I  am  very  glad  that  the  National  Civic  Federation  is  calling 
such  a  conference.  It  seems  to  me  fundamentally  true  that  the 
interests  of  the  railroads,  the  shippers  and  the  general  public 
are  essentially  one,  and  that  it  is  of  the  utmost  importance  that 
men  representing  all  three  classes  should  get  together,  compare 
views  and  endeavor  to  come  to  some  agreement  as  to  the  gen- 
eral principles  by  which  those  common  interests  can  be  best 
served.  I  think  what  we  most  need  on  the  subject  is  just  what 
the  call  indicates  this  meeting  will  endeavor  to  secure — light, 
not  heat.  What  we  need  to  understand,  and  what  Only  experi- 
ence can  teach  us,  is  the  relation  between  competition  and  com- 
bination— the  one  the  centrifugal,  the  other  the  centripetal  force 
of  society.  He  who  believes  only  in  combination  will  logically 
be  led  to  socialism ;  he  who  believes  only  in  competition  will 
logically  be  led  to  nihilism.  Neither  of  these  results  can  pos- 
sibly furnish  the  solution  of  the  problems  which  now  confront 
us.  We  must  learn  how  to  secure  the  advantages  of  combina- 
tion without  destroying  the  individual ;  to  maintain  brotherhood 
in  practical  forms  without  sinking,  obscuring  or  belittling  per- 
sonality." 

10 


RICHARD  WATSON  GILDER,  Editor  of  "The  Century": 

"There  is  a  sign  over  a  shoemaker's  shop  in  the  village  where 
I  go  in  summer  which  has  this  inscription  above  it  in  large  let- 
ters :  'CALL  IN  AND  TALK  IT  OVER.'  I  am  glad  the  Civic 
Federation  has  put  that  sign  up  over  its  shop  precisely  at  this 
time,  and  that  the  subject  of  talk  is  to  be  the  burning  question 
of  the  day — the  question  of  the  Trust.  So  many  of  the  Federa- 
tion's talks  have  proved  no  less  useful  than  timely  that  I  am 
sure  this  new  talk  will  help  to  bring  calmness  and  coolness  to 
the  public  mind,  and  Heaven  knows  it  needs  them!" 

PETER  S.  GROSSCUP,  Judge  U.  S.  Circuit  Court,  Chicago: 

"The  corporations  of  this  country  have  grown  up  as  develop- 
ments of  our  business  life,  without  much  reference  to  their  re- 
lations to  the  people  as  institutions  of,  and  for,  the  people.  It 
is  time  that  they  be  looked  into  as  institutions  of,  and  for,  the 
people.  The  Sherman  Act  was  passed  before  the  regulation  of  I 
interstate  carriers  was  seriously  attempted  or  foreseen.  Now| 
that  'regulation'  has  come  it  is  time  to  inquire  how  far  the  old 
'prohibitions'  should  remain.  The  whole  matter — corporate  re- 
construction and  a  restudy  of  the  anti-trust  act — should  be  gone 
over  carefully  with  a  view  to  bringing  some  kind  of  order  out 
of  the  disorder  that  now  prevails!" 

N.  J.  BACHELDER,  Grand  Master  of  the  National  Grange: 

"I  do  not  know  of  any  meeting  more  opportune  or  more 
needed  at  this  time  than  the  one  called  by  the  National  Civic 
Federation  at  Chicago,  October  22-25,  to  discuss  combinations 
and  trusts.  The  confusion  in  the  public  mind  to-day  is  very 
great  on  many  of  the  phases  of  the  problem.  It  certainly  is 
time  for  serious  people  to  discuss  the  subject  when  President 
Roosevelt  and  the  law  officers  of  the  government,  whose  duty 
it  is  to  enforce  the  Sherman  Anti-Trust  Act,  openly  state  that 
the  business  of  the  country  to-day  cannot  be  done  without  vio- 
lating the  law." 

RIGHT  REV.  HENRY  C.  POTTER : 

"I  am  profundly  thankful  to  hear  of  the  proposed  conference 
for  the  purpose  of  considering  the  relations  of  trusts  to  the  pub- 
lic welfare  and  interest.  There  is  no  subject  concerning  which 
a  wider  ignorance,  or  more  curious  misapprehension,  exists  in 
the  public  mind,  and  it  is  greatly  to  be  desired  that,  in  bringing 
the  whole  subject  of  the  administration  of  corporations  into  the 
light,  we  may  be  assisted  by  the  best  intelligence  of  the  land." 


11 


JOHN  S.  MILLER,  Peck,  Miller  &  Starr,  Attorneys,  Chicago: 
"If  the  Sherman  Act  is  to  remain  upon  the  statute  books  it 
should  be  amended,  if  it  is  to  be  a  beneficent  act,  and  not  one 
hostile  and  injurious  to  the  industries  and  prosperity  of  the 
country.  It  should  be  made  specific  and  definite,  so  that  the 
men  who  are  conducting  the  commerce  of  the  country  may 
know  from  the  act  itself,  or  at  least  have  some  means  of  learn- 
ing with  certainty,  what  acts  or  conduct  is  forbidden  by  the  law 
and  made  criminal,  and  what  is  not.  The  present  law  lacks  this 
definiteness.  It  does  not  discriminate,  in  its  terms,  between 
that  which  is  good  and  that  which  is  evil.  It  furnishes  no  rule 
for  the  guidance  of  merchants  in  the  conduct  of  their  business. 
1  think  the  idea  of  holding  a  national  conference  to  discuss  this 
subject  and  to  try  and  come  to  an  agreement  on  some  general 
principles  will  be  very  valuable." 

HAMILTON  HOLT,  Editor  of  "The  Independent": 

"There  is  no  more  pressing  problem  before  the  business  peo- 
ple than  what  to  do  with  the  trusts.  If  recent  developments 
demonstrate  anything,  they  demonstrate  that  under  modern 
methods  of  production  and  distribution  the  laissez  faire  policy 
carried  out  to  its  logical  conclusion  means  economic  monopoly, 
business  corruption,  swollen  fortunes  and  social  discontent.  The 
trust  question,  therefore,  at  the  present  moment  is  a  question 
of  how  far  the  American  people  are  prepared  to  go  in  the  way 
of  regulation,  for  surely,  if  regulation  fails,  the  alternative  is 
government  ownership.  In  my  opinion,  our  chief  trouble  arises 
from  the  fact  that  we  have  not  developed  our  trust  ethics  as 
fast  as  our  trust  economics.  If  the  forthcoming  trust  confer- 
ence of  the  National  Civic  Federation  can  shed  any  light  on  the 
ethical  aspect  of  the  trust  movement,  it  will  have  rendered  a 
lasting  service  to  the  country." 
JOHN  MITCHELL,  United  Mine  Workers  of  America: 

"My  judgment  is  that  this  conference  will  prove  of  the  great- 
est interest,  and  will  be  productive  of  good  results,  as  it  will 
give  opportunity  for  full  and  free  discussion  upon  a  subject  that 
concerns  the  well-being  of  all  our  people." 

CHARLES  G.  DAWES,  President  Central  Trust  Company  of 

Illinois: 

"I  regard  the  calling  of  this  conference  by  the  Nationa]  Civic 

Federation  at  this  time  as  a  highly  useful  piece  of  work.    It  is 

always  wise  to  say,  'Come,  let  us  reason  together.'     The  in- 

12 


dustrial  problems  confronting  us  to-day  in  this  country  demand 
consideration  by  the  best  brains  of  the  nation.  The  commercial, 
manufacturing,  labor,  agricultural  and  financial  interests  de- 
mand a  solution  of  the  great  trust  and  combination  problem 
that  will  protect  all  the  people.  Personally,  I  believe  that  com- 
binations are  absolutely  necessary  in  conducting  the  business  of 
the  country;  but  they  should  be  restricted  and  the  rights  of  the 
people  safeguarded  by  strict  supervision  and  regulation  by  the 
government,  State  and  Federal." 

SAMUEL  GOMPERS,  President  American  Federation  of 
Labor: 
"I  participated  in  the  Civic  Federation  conference  in  1899, 
and  am  sure  that  its  educational  value  was  great.  The  forth- 
coming conference,  I  feel  sure,  will  also  be  productive  of  much 
good  to  the  nation,  in  that  it  will  allow  all  sides  to  meet  and 
freely  express  their  opinion  on  one  of  the  greatest  subjects  this 
country  has  to  deal  with  to-day." 

JOHN  M.  STAHL,  President  Farmers'  National  Congress: 

<kThe  questions  to  be  discussed  at  the  national  conference  on 
trusts  and  combinations  are  certainly  the  most  important  press- 
ing for  solution  before  our  people  to-day. 

"1.  What  is  the  division  of  powers  under  the  Constitution 
between  the  nation  and  the  State? 

"2.  How  should  the  corporation  be  constructed  and  super- 
vised to  protect  investments  of  capital  on  the  one  hand,  and  the 
consumers  on  the  other? 

"3.  What  are  combinations  in  restraint  of  trade?  Are  labor 
organizations  that  seek  to  fix  the  price  at  which  they  will  sell 
their  labor ;  employers'  organizations  that  seek  to  fix  the  price 
they  will  pay  for  labor;  farmers'  organizations  that  seek  to  fix 
the  price  at  which  they  will  sell  their  wheat,  their  tobacco  and 
their  cotton ;  organizations  of  buyers  that  seek  to  fix  the  price 
they  will  pay  for  such  products ;  are  the  innumerable  wholesale 
and  retail  organizations  dealing  in  all  kinds  of  merchandise  that 
seek  to  secure  what  they  allege  to  be  fair  profits — are  all  of 
these  organizations,  or  a  part  of  them  only,  prohibited  by  the 
Sherman  Anti-Trust  Act?  In  considering  the  trust  question 
we  should  look  at  it,  not  from  our  own  particular  interest,  but 
from  the  standpoint  of  society  as  a  whole." 

The  matter  was  taken  up  with  great  interest  by  the  Governors 
of  the  several  States  and  by  the  presidents  of  commercial  bodies, 

13 


who  named  delegates  in  response  to  the  invitation  of  the  Na- 
tional Civic  Federation.  A  significant  evidence  of  this  greater 
interest  is  found  in  the  larger  number  of  delegations  appointed 
in  1907  than  in  1899.    The  records  show  the  following: 

Delegations.  1899.      1907. 

Appointed  by  Governors 33  39 

Appointed  by  national  and  State  organizations 22  33 

Appointed  by  labor  organizations 7  14 

Appointed  by  local  commercial  bodies 33  58 

Total    95  144 

Furthermore,  the  attendance  of  492  delegates  in  1907  might 
be  contrasted  with  that  of  238  delegates   at   the   earlier   con- 
ference. 

The  conference  of  1907,  though  larger  in  numbers,  was  much 
more  of  a  unit  in  sentiment.  It  developed  at  an  early  stage  of 
the  discussion  that  there  was  no  important  element  antagoniz- 
ing the  trust  and  combination  as  such.  There  were  few  speak- 
ers who  failed  to  dwell  upon  the  advantages  which  had  accrued 
to  the  nation  from  some  combinations,  and  from  the  spirit  of 
association  which,  after  all,  cannot  be  separated  from  them.  On 
the  other  hand,  there  was  no  lack  of  emphasis  in  dwelling  upon 
the  evils  which  had  been  disclosed  among  trusts  and  com- 
binations. 

The  resolutions  of  the  conference,  adopted  by  a  unanimous 
vote,  reveal  these  tendencies.  They  are  a  call  for  further  ex- 
amination and  more  light,  but  a  call  for  such  examination  along 
certain  pretty  well-defined  lines.  They  should  receive  the  at- 
tention of  Congress  as  an  expression  of  the  popular  will  on  this 
pressing  question. 


T4 


COMMITTEE    ON    ARRANGEMENTS 
National  Conference  on  Trusts  and  Combinations. 

Dr.  Nicholas  Murray  Butler, 

President  Columbia  University,  New  York  City. 
Samuel  Gompers, 

President  American  Federation  of  Labor,  Washington,  D.  C. 
Hon.  Nahum  J.  Bachelder, 

Master  of  the  National  Grange,  Concord,  N.  II. 
Hon.  Seth  Low,  New  York  City. 
Franklin  MacVeagh,  Chicago,  111. 
\Most  Rev.    (Archbishop)   John  Ireland,  St.  Paul,  Minn, 
judge  "P.  ~S.  Grosscup,  Chicago,  111. 

Dr.  Albert  Shaw,  Editor  Review  of  Reviews,  New  York  City. 
John  Mitchell, 

President  United  Mine  Workers  of  America,  Indianapolis,  Ind. 
Charles  H.  Smith, 

President  Illinois  Manufacturers'  Association,  Chicago,  111. 
Dr.  Carroll  D.  Wright,  President  Clark  College,  Worcester,  Mass. 
Dr.  Lyman  Abbott,  Editor  Outlook,  New  York  City. 
August  Belmont,  New  York  City. 

J.  W.  Jenks,  Professor  in  Cornell  University,  Ithaca,  N.  Y. 
Emerson  McMillen,  New  York  City. 
P.  H.  Morrissey, 

Grand  Master  Brotherhood  Railroad  Trainmen,  Cleveland,  Ohio. 
Captain  Ellison  A.  Smyth, 
.  Pres.  So.  Carolina  Cotton  Manufacturers'  Association,  Pelzer,  S.  C. 

X^igjit  JRev.  (Bishop)  Henry  C.  Potter,  New  York  City. 
David  R.  Forgan,  President  National  City  Bank  of  Chicago,  Chicago,  111. 
James  Duncan, 

Vice-President  American  Federation  of  Labor,  Quincy,  M,ass. 
Col.  George  Harvey,  Editor  North  American  Review,  New  York  City. 
D.  A.  Tompkins,  President  The  D.  A.  Tompkins  Co.,  Charlotte,  N.  C. 
John  M.  Stahl,  President  Farmers'  National  Congress,  Chicago,  111. 
Herman  Ridder,  Staats  Zeitung,  New  York  City. 
Clarence  H.  Mackay,  New  York  City. 

John  H.  Holliday,  President  The  Trust  Co.,  Indianapolis,  Ind.  ■ 
Dr.  Harry  Pratt  Judson,  President  University  of  Chicago,  Chicago,  111. 
Dr.  Talcott  Williams,  The  Philadelphia  Press,  Philadelphia,  Pa. 
D.  J.  Keefe, 

President  International  Longshoremen,  Marine  and  Transport  Work- 
ers' Association,  Detroit,  Mich. 
A.  C.  Bartlett,  Chicago,  111. 

Dr.  Richard  Watson  Gilder,  Editor  Century  Magazine,  New  York  City. 
John  S.  Miller,  Esq.,  Chicago,  111. 
Isaac  N.  Seligman,  New  York  City. 
F.  Parmalee  Prentice,  Esq.,  New  York  City. 

Frederick  D.  Underwood,  President  Erie  Railroad,  New  York  City. 
w 

^  ^'  15 


Sereno  S.  Pratt,  Editor  Wall  Street  Journal,  New  York  City. 
Theodore  B.  Wilcox, 

President  The  Portland  Flouring  Mills  Co.,  Portland,  Ore. 
Hon.  M.  E.  Ingalls,  Chairman  Big  Four  Railroad,  Cincinnati,  Ohio. 
Warren  S.  Stone, 

Grand    Chief    International    Brotherhood    of    Locomotive    Engineers, 

Cleveland,  Ohio. 
Charles  G.  Dawes,  President  Central  Trust  Co.,  Chicago,  111. 
Hon.  Frederick  N.  Judson,  St.  Louis,  Mo. 

Richard  T.  Ely,  Professor  in  University  of  Wisconsin,  Madison,  Wis. 
John  G.  Milburn,  Esq.,  New  York  City. 
Hamilton  Holt,  Editor  The  Independent,  New  York  City. 
J.  J.  Hannahan,  Grand  Master  of  Locomotive  Firemen,  Peoria,  111. 
Samuel  Mather,  Cleveland,  Ohio. 
Dr.  Benjamin  Ide  Wheeler, 

President  University  of  California,  Berkeley,  Cal. 
F.  W.  Taussig,  Professor  in  Harvard  University,  Cambridge,  Mass. 
A.  B.  Garretson, 

Grand  Chief  Brotherhood  of  Railway  Conductors,  Cedar  Rapids,  Iowa. 
John  S.  Huyler,  New  York  City. 

J.  R.  MacColl,  President  Lorraine  Manufacturing  Co.,  Pawtucket,  R.  I. 
E.  J.  Greenhut,  Treasurer  Siegel  Cooper  Co.,  New  York  City. 
Andrew  Carnegie,  New  York  City. 
Hon.  William  Dudley  Foulke.  Richmond,  Ind. 
James  Speyer,  New  York  City. 

Frank  D.  LaLanne,  President  National  Board  of  Trade,  Philadelphia,  Pa. 
Wihiam  Jay  Schieffelin,  New  York  City. 
Hon.  Cornelius  N.  Bliss,  New  York  City. 
Hon.  Charles  F.  Brooker,  Ansonia,  Conn. 
John  A.  Sleicher,  Editor  Leslie's  Weekly,  New  York  City. 
James  M.  Beck,  Esq.,  New  York  City. 
Louis  D.  Brandeis,  Esq.,  Boston,  Mass. 

O.  R.  Young,  Editor  International  Engineer,  New  York  City. 
Thomas  Ewing,  Jr.,  New  York  City. 
Marcus  M.  Marks,  New  York  City. 
Charles  W.  Knapp, 

President  and  General  Manager  St.  Louis  Republic,  St.  Louis,  Mo. 
Allen  Ripley  Foote,  Columbus,  Ohio. 


10 


OFFICIAL    LIST    OF    DELEGATES    TO    THE    NATIONAL 
CONFERENCE  ON  TRUSTS  AND  COMBINATIONS. 


APPOINTED  BY  GOVERNOR  COMER,  OF  ALABAMA. 


Francis  J.  Inge,  Mobile. 

G.  J.  Flournoy,  Mobile. 

A.  S.  Lyons,  Mobile. 

John  A.  Lusk,  Guntersville. 

J.  Manly  Foster,  Tuscaloosa. 

A.  H.  Carmichael,  Tuscumbia. 

R.  B.  Barnes,  Opelika. 

Richmond  P.  Hobson,  Greensboro. 

J.  Lee  Long,  Breenville. 

J.  Thomas  Heflin,  Lafayette. 


Thomas  C.  McClellan,  Athens. 
John  R.  Tyson,  Montgomery. 
O.  C.  Maner,  Montgomery. 
Horace  Hood,  Montgomery. 
Alex.  T.  London,  Birmingham. 
J.  F.  Stallings,  Birmingham. 
Henry  B.  Gray,  Birmingham. 
Frank  S.  White,  Birmingham. 
Joseph  F.  Johnston,  Birmingham. 
Samuel  Will  John,  Birmingham. 
Nathan  L.  Miller,  Birmingham. 

APPOINTED  BY   GOVERNOR  BUCHTEL,  OF  COLORADO. 
Joel  F.  Vaile,  Denver.  F.  E.  Struby,  Denver. 

James  B.  Grant,  Denver.  R.  J.  Verner,  Colorado  Springs. 

G.  D.  Manly,  Denver.  G.  A.  Hally,  Denver. 

Rev.  William  O'Ryan,  Denver.  Axel   Swanson,  Denver. 

W.   P.  McPhee,  Denver.  Max   Morris,   Denver. 

APPOINTED  BY   GOVERNOR  WOODRUFF,  OF  CONNECTICUT. 

Irving  Fisher,  New  Haven.  Charles  F.   Chapin,  Waterbury. 

Flavel  S.   Luther,  Hartford.  H.  H.  Bridgman,  Norfolk. 

John  H.  Perry,  Westport.  Schuyler  Merritt,  Stamford. 

Frank  T.  Brown,  Norwich.  Chas.  F.  Brooker,  Ansonia. 

APPOINTED  BY  THE  BOARD  OF  COMMISSIONERS,  DISTRICT 

OF    COLUMBIA. 

C.  C.  Glover. 
Charles  J.  Bell. 
John  Joy   Edson. 
James  H.  Gore. 
J.  Selwyn  Tait. 
David  H.  Buel. 
Simon  Wolf. 
Hennen  Jennings. 
S.  W.  Woodward. 


Gen.  John  M.  Wilson. 
Col.  Robert  N.  Harper. 
Scott  C.  Bone. 
Theodore  W.   Noyes. 
Edgar   D.    Shaw. 
John  R.  McLean. 
Charles   W.    Needham. 
D.  J.  O'Connell. 
B.   H.  Warner. 
James  F.  Oyster. 


APPOINTED   BY    GOVERNOR   BROWARD,    OF    FLORIDA. 


Frank  Harris,  Ocala. 
Albert  W.  Gilchrist,  Punta  Gorda. 
R.  Hudson  Burr,  Tallahassee. 
Jefferson  B.  Browne,  Key  West. 
John  N.  C.  Stockton,  Jacksonville. 
Nathan  P.  Bryan,  Jacksonville. 


W.  H.  Ellis,  Tallahassee. 
Frank  L.  Mayes,  Pensacola. 
W.  B.  Crawford,  Pensacola. 
C.  L.  Bittinger.  Ocala. 
J.  W.  Archibald,  Chicago,  111. 


17 


APPOINTED  BY  GOVERNOR  DENEEN,  OF  ILLINOIS. 


J.  V.  Farwell,  Jr.,  Chicago. 
John  G.  Shedd,  Chicago. 
David  R.  Forgan,  Chicago. 

A.  C.  Bartlett,  Chicago. 
F.  A.  Delano,  Chicago. 

B.  A.  Eckhart,  Chicago. 
Alfred  L.  Baker,  Chicago. 
Harry  Pratt  Judson,  Chicago. 
Edmund  J.  James,  Urbana. 
Geo.  W.   Perkins,  Chicago. 
Edwin  R.  Wright,  Chicago. 
Marvin  Httghitt,  Chicago. 

A.  J.  Earling,  Chicago. 


Benson  Wood,  Effingham. 
Charles  Whitney,  Waukegan. 
James  W.  Garner,  Urbana. 
John  Mitchell,  Spring  Valley. 
W.  D.  Ryan,   Springfield. 
J.  M.  Dickinson,  Chicago. 
Franklin  MacVeagh,  Chicago. 
John  S.  Miller,  Chicago. 
W.  J.  Calhoun,  Chicago. 
Charles   G.  Dawes,  Chicago. 
Charles  Ridgely,  Springfield. 
Abram  W.  Harris,  Evanston. 
John  F.  Scanlan,  Chicago. 


APPOINTED   BY   GOVERNOR  HANLY,   OF  INDIANA. 


John  H.  Holliday,  Indianapolis. 
N.  B.  Hawkins,  Portland. 
W.  D.  Bynum,  Indianapolis. 
David  M.  Parry,  Indianapolis. 
Wm.  Dudley  Foulke,  Richmond. 
James   M.   Lynch,   Indianapolis. 
William  Huber,  Indianapolis. 
James  E.  Watson,  Rushville. 
Charles  W.  Miller,  Goshen. 
William  L.  Taylor,  Indianapolis. 


Hugh  T.  Miller,  Columbus. 

Freemont  Goodwine,  Williamsport. 

John  Edwards,  Mitchell. 

Winfleld  T.  Durbin,  Anderson. 

Charles  S.  Bash,  Fort  Wayne. 

J.  V.  Zartman,  Indianapolis. 

J.  E.  Frederick,  Kokomo. 

W.  H.  Tobin,  Muncie. 

Thomas  R.  Marshall,  Columbia  City. 

Job  Freeman,  Linton. 


APPOINTED  BY   GOVERNOR  CUMMINS,  OF  IOWA. 
A.  L.  Urick,  Des  Moines.  W.  B.  Seely,  Mt.  Pleasant. 

Rev.  J.  F.  Nugent,  Des  Moines.  Simon  Fisher,  Rock  Rapids. 

Rev.  Frank  W.  Hodgdon,  Des  Moines.W.  L.  Harding,  Sioux  City. 
John  Adams,  Dubuque.  F.  L.  Maytag,  Newton. 

Sydney  E.  Sinclair,  Cedar  Rapids.       C.  C.  Clifton,  Council  Bluffs. 
Nathaniel  M.  French,  Davenport. 

APPOINTED  BY  GOVERNOR  HOCH,  OF  KANSAS. 


A.  W.  Benson,  Ottawa. 

W.  J.  Fitzgerald,  Dodge  City. 

Geo.  E.  Tucker,  Eureka. 

A.  C.  Mitchell,  Lawrence. 

C.  L.  Davidson,  Wichita. 

W.  L.  Cunningham,  Arkansas  City 

Jas.  F.  Getty,  Kansas  City. 

Geo.  H.  Hodges,  Olathe. 

J.  H.  Atwood,  Leavenworth. 

H.  B.  Miller,  Osage  City. 


W.   B.  Ham,  Stockton. 
W.  W.  Caldwell,  Concordia. 
S.  N.  Porter,  Caney. 
John  Madden,  Parsons. 
Geo.  W.  Glick,  Atchison. 
James  W.  Orr,  Atchison. 
T.  A.  McNeal,  Topeka. 
Frank  P.  McLennan,  Topeka. 
Harold  Chase,  Topeka. 
Dell  Keizer,  Topeka. 


APPOINTED   BY  GOVERNOR   BLANCHARD,  OF  LOUISIANA. 


R.  E.  Lee,  New  Orleans. 

T.  J.  Woodward,  New  Orleans. 

David  Blackshear,  New  Orleans. 

J.  B.  Turner,  Alexandria. 

W.  W.  Duson,  Crowley. 


H.  W.  Ragan,  Ruston. 
W.  M.  Murphy,  Tallulah. 
R.  R.  Reid,  Amite  City. 
W.  A.  Mabry,  Shreveport. 
T.  J.  Kerna,  Baton  Rouge. 

18 


APPOINTED    BY    GOVERNOR    BECKHAM,    OF    KENTUCKY. 
Geo.  L.  Sehon,  Louisville. 

APPOINTED  BY  GOVERNOR  COBB,  OF  MAINE. 


Isaiah  K.  Stetson,  Bangor. 
John  F.  Connelly,  Bangor. 
George  H.  Eaton,  Calais. 
William  C.  Johnson,  Hallowell. 
Roscoe  A.  Eddy,  Bar  Harbor. 


Alden  M.  lrlagg,  Auburn. 
Luther  F.  McKinney,  Bridgton. 
John  Clark  Scates,  Westbrook. 
George  E.  Morrison,  Saco. 
Frederick  S.  Walls,  Vinalhaven. 


APPOINTED   BY  GOVERNOR  WARFIELD,  OF  MARYLAND. 


Theodore  Marburg,  Baltimore. 
John  M.  Glenn,  New  York  City. 
Robert  Garrett,'  Baltimore. 
Daniel  C.  Gilman,  Baltimore. 
Edward  N.  Rich,  Baltimore. 

APPOINTED   BY   GOVERNOR 
John  F.  Crocker,  Boston. 
F.  W.  Hamilton,  Tufts  College. 
F.  W.  Taussig,  Cambridge. 
George  G.  Crocker,  Boston. 
John  Bascom,  Williamstown. 
Brooks  Adams,  Quincy. 
James  M.  W.  Hall,  Cambridge. 
C.  J.  H.  Woodbury,  Boston. 


Henry  D.  Flarlan,  Baltimore. 
Edward  Hirsch,  Baltimore. 
Fabian  Franklin,  Baltimore. 
Oliver  P.  Baldwin,  Baltimore. 
William  Frisch,  Baltimore. 

GUILD,  OF  MASSACHUSETTS. 
D.  D.  Driscoll,  Boston. 
James  Logan,  Boston. 
Max  Mitchell,  Boston. 
P.  J.  Guerin,  Boston. 
James  P.  Magenis,  Boston. 
Edwin  Ginn,  Boston. 
Albert   Hibbert,   Fall   River. 
Horace  G.  Allen,  Boston. 


APPOINTED  BY  GOVERNOR  WARNER,  OF  MICHIGAN. 


Geo.  H.  Barbour,  Detroit. 
W.  D.  Mahon,  Detroit. 
Ryerson  Ritchie,  Detroit. 
J.  Dallas  Dort,  Flint. 
Hal  H.  Smith,  Detroit. 
Daniel  W.  Tower,  Grand  Rapid.' 
H.  A.  Franbach,  Cheboygan. 
John  B.  Howarth,  Detroit. 


H.  S.  Jordan,  Detroit. 
Carman  N.  Smith,  Bay  City. 
F.  B.  Woodward,  Owosso. 
John  F.  Hogan,  Detroit. 
F.  B.  Smith,  Detroit. 
William  Judson,  Grand  Rapids 
J.  H.  Borough,  Marshall. 


APPOINTED  BY  GOVERNOR  JOHNSON,  OF  MINNESOTA. 


John  W.  Willis,  St.   Paul. 
Karl  Mathie,  St.  Cloud. 
Martin  Hughes,   Hibbing. 
Timothy   O'Connor,    Renville. 
A.  T.  Ankeny,  Minneapolis. 
H.   S.  Lewis,  Mapleton. 


W.   D.  Washburn,  Jr.,  Minneapolis. 
Frank  B.  Kellogg,  St.  Paul. 
Charles  d'Autremont,  Jr.,   Duluth. 
H.  H.  Dunn,  Albert  Lea. 
John  H.  Gray,  Minneapolis. 


APPOINTED   BY   GOVERNOR  FOLK,   OF  MISSOURI. 


J.  Edward  Kirbye,  Springfield. 

J.  P.  Greene,  Liberty. 

W.  S.  Chaplin,  St.  Louis. 

M.  E.  Benton,  Neosho. 

H.  N.  Phillips,  Poplar  Bluff. 

A.  B.  Cockerill,  Nevada. 

N.  M.  Pcttingill,  Memphis. 


L.  A.  Vories,  St.  Joseph. 
L.  H.  Herring,  Brunswick. 
Wm.  P.  Borland,  Kansas  City.  - 
Frank  Berlin,  Princeton. 
John  M.  Gibson,  Elsberry. 
George  T.  Lee,  Van  Buren. 
Murray  Shipley  Wildman,  Columbia. 

io 


AFPOINTED   BY   GOVERNOR  VARDAMAN,  OF  MISSISSIPPI. 


Frank  Burkitt,  Okolona. 
Jos.  Stennis,  Meridian. 
John  Bailey,  Bailey. 
J.  Q.  Poindexter,  Ravine. 
John  F.  Brown,  Oxford. 
W.  N.  Ethridge,  Meridian. 
R.  L.  Dabney,  Hernando. 

C.  Lee  Crum,  New  Albany. 

D.  C.  Anderson,  Ripley. 

S.  A.  Witherspoon,  Meridian. 
J.  B.  Sternberger,  Magnolia. 

E.  J.  Simmons,  Magnolia. 
J.  M.  Arnold,  Ellisville. 


T.  M.  Beavers,  Newton. 
A.  S.  Kyle,  Batesville. 
L.  F.  Rainwater,  Sardis. 
A.  S.  Yarborough,  Como. 
Robert  E.  Houston,  Aberdeen. 
A.  M.  Hicks,  Myrville. 
J.  M.  Weaver,  Rara  Avis. 
Charles  Scott,  Rosedale. 
Jeff  Truly,  Fayette. 
Earl  Brewer,  Clarksdale. 
E.  N.  Thomas,  Greenville. 
U.  T.  Sisson,  Winona. 
E.  F.  Noel,  Lexington. 


APPOINTED  BY  GOVERNOR  TOOLE,  OF  MONTANA. 
T.  J.  Walsh,  Helena.  Lee  Mantle,  Butte. 

Judson  A.  Ferguson,  Helena.  Walter  Hartman,  Bozeman. 

William  Scallon,  Butte.  Sidney  Sanner,  Niles  City. 

APPOINTED  BY  GOVERNOR  SHELDON,  OF  NEBRASKA. 
E.  J.  Burkett,  Lincoln.  Walter  L.  Locke,  Lincoln. 

Norris  Brown,  Kearney.  Albert  Watkins,  Lincoln. 

M.  P.  Kinkaid,  O'Neill.  E.  H.  Hinshaw,  Fairbury. 

G.  M.  Hitchcock,  Omaha.  G.  W.  Norris,  McCook. 

E.  M.  Pollard,  Nehawka.  Frank  Edgerton,  Lincoln. 

APPOINTED  BY  GOVERNOR  FLOYD,  OF  NEW  HAMPSHIRE. 


Nahum  J.  Bachelder,  Concord. 
Henry  B.  Quinby,  Lakeport. 
Geo.  N.  Adams,  Peterboro. 
J.  Frank  Lawrence,  Rye. 
Frederick  K.  Copeland,  Claremont. 


John  F.  Bass,  Peterboro. 
J.  G.  M.  Glessner,  Bethlehem. 
Joseph  Lagassie,  Berlin. 
Daniel  W.  Finn,  Keene. 
Park  Mitchell,  Manchester. 


APPOINTED  BY  GOVERNOR  CURRY,  OF  NEW  MEXICO. 
T.  B.  Catron,  Santa  Fe.  George  F.  Bixby,  Roswell. 

T.  W.  Heman,  Tucumcari.  Lucius  Dills,  Roswell. 

H.  D.  Bowman,  Las  Cruces.  George  B.  Berringer,  Raton. 

W.  P.  Metcalf,  Albuquerque.  H.  A.  Ensign,  Raton. 

J.  H.  Bearrup,  Albuquerque.  William  E.  Denniston,  Las  Vegas. 

APPOINTED  BY  GOVERNOR  HUGHES,  OF  NEW  YORK. 
Seth  Low,  New  York  City.  Nathan  Straus,  New  York  City. 

Nicholas  Murray  Butler,  N.  Y.  City.  G.  E.  Emmons,  Schenectady. 
Samuel  Gompers,  Washington,  D.  C.  F.  R.  Hazard,  Syracuse. 
Lyman  Abbott,  New  York  City.  Grange  Sard,  Albany. 

Albert  Shaw>  New  York  City.  W.  B.  Howland,  New  York  City.  . 

J.  W.  Jenks,  Ithaca.  Timothy  Healy,  New  York  City. 

Herman  Ridder,  New  York  City.      Paul  M.  Warburg,  New  York  Oty. 


R.  W.  Gilder,  New  York  City. 


Robert  E.  Simon,  New  York  City. 


Isaac  N.  Seligman,  New  York  City.  V.  Everit  Macy,  New  York  City. 
Hamilton  Holt,  New  York  City.  Marcus  M.  Marks,  New  York  City. 

James  B.  Reynolds,  New  York  City. 


20 


APPOINTED  BY  GOVERNOR   STOKES,  OE  NEW  JERSEY. 
Howard  K.  Wood,  Jersey  City. 

APPOINTED   BY  GOVERNOR  GLENN,  OE  NORTH   CAROLINA. 

D.  A.  Tompkins,  Charlotte.  F.  R.  Hewitt,  Asheville. 

Z.  P.  Smith,  Raleigh.  Henry  E.  Fries,  Winston-Salem. 
Hugh  McRea,  Wilmington. 

APPOINTED  BY  GOVERNOR  HARRIS,  OF  OHIO.- 

Melville  E.  Ingalls,  Cincinnati.  Chas.  R.  Atherton,  Cincinnati. 

Samuel  Mather,  Cleveland.  F.  A.  Derthick,  Mantua. 

Edward  S.  Wilson,  Columbus,  M.  D.  Follett,  Marietta. 

W.  I.  Chamberlain,  Cleveland.  G.  E.  Pomeroy,  Toledo. 

Charles  F.  Watts,  Toledo.  Samuel  Scovil,  Cleveland. 
Rev.  Washington  Gladden,  Columbus.  Allen  R.  Foote,  Columbus. 

James  A.  Rice,  Canton.  C.  D.  Firestone,  Columbus. 

William  O.  Thompson,  Columbus.  P.  H.  Morrisey,  Cleveland. 

George  D.  Selby,  Portsmouth.  Geo.  W.  Lattimer,  Columbus. 
William  Green,  Columbus. 

APPOINTED   BY  GOVERNOR  FRANTZ,   OF  OKLAHOMA. 

H.  H.  Howard,  Oklahoma  City.  W.  W.  Noffsinger,  Kingfisher. 

John  H.  Mosier,  Norman.  Robert  Forest,  El  Reno. 

Emery  Foster,  Chandler.  David  P.   Marum,  Woodward. 

W.  C.  Tetrick,  Blackwell.  N.  C.  Stephenson,  Hooker. 

B.  A.  Parmenter,  Lawton.  Henry  Bulow,  Arapaho. 

Robert  A.  Lowry,  Stillwater.  A.  H.  Russell,  Sayre. 

APPOINTED   BY   GOVERNOR   CHAMBERLAIN,   OF   OREGON. 

Rev.  Hiram  Vrooman,  Portland.  Sam  Veatch,  Portland. 

Charles  F.  Beebe,  Portland.  L.  T.  Gilliland,  Portland. 

Bernard  Albers,   Portland.  R.  A.  Harris.  Arleta. 

R.  D.  Inman,  Portland.  George  Langford,  Portland. 

Harry  Gurr,  Portland.  M.  W.  Parelius,  Portland. 
Charles  Gram,  Portland. 

APPOINTED    BY    GOVERNOR  STUART,    OF    PENNSYLVANIA. 

Talcott   Williams,  Philadelphia.  John  L.  Stewart,  So.  Bethlehem. 

Clinton  R.  Woodruff,  Philadelphia.  Emory  R.  Johnson,   Philadelphia. 

Frank  Feeney,  Philadelphia.  Abraham  M.  Beitler,   Philadelphia. 

Ernest  A.  Hempstead,  Meadville.  William  P.  Potter,  Pittsburg. 

Rev.  J.  Gray  Bolton,  Philadelphia.  Frank   D.   LaLanne,   Philadelphia. 
Denis  A.  Hayes,  Philadelphia. 

APPOINTED  BY  GOVERNOR  HIGGINS,  OF  RHODE  ISLAND. 

James  Q.  Dealey,  Providence.  John  G.  Massie,  Providence. 

Charles  Carroll,   Providence.  Andrew  K.   Quinn,   Newport. 

APPOINTED  BY  GOVERNOR  PATTERSON,  OF  TENNESSEE. 

A.  J.  Coates,  Bolivar.  Austin  Peay,  Clarksville. 

Rice  A.  Pierce,  Union  City.  Alfred  J.  Griffith,  Nashville. 

R.  F.  Spraggins,  Jackson.  Frank  Carden,  Chattanooga. 

21 


APPOINTED  BY  GOVERNOR 

Bartlett  Tripp,  Yankton. 

George  Rice,  Flandreau. 

H.   M.  Jones,   Sioux  Falls. 

O.  L.  Branson,  Mitchell. 

P.  D.  Kribs,  Columbia. 

George  L.  Ayres,  Deadwood. 

Thomas  Thorson,   Canton. 

Philo  Hall,  Brookings. 

A.  O.  Ringsrud,  Elk  Point. 

W.  H.  Parker,  Deadwood. 


i'KAWFORD,  OF  SOUTH  DAKOTA. 
J.   A.    Pickler,  Faulkton. 
Fl.   K.   Gjolme,   Platte. 
R.  S.  Vessey,  Wessington  Springs 
John  B.  Hanton,  Watertown. 
Alan  Bogue,  Center ville. 
W.  C.  Cook,  Plankinton. 
John  Sutherland,  Pierre. 
A.  H.  Ingersoll,  Sisseton. 
Charles  Thompson,  Miller. 
H.  H.  Heath,  Artesian. 


APPOINTED  BY  GOVERNOR  CUTLER,  OF  UTAH. 


L.  R.  Martineau,  Salt  Lake. 
Le  Grand  Young,  Salt  Lake. 
W.  P.  O'Meara,  Salt  Lake. 
Waldemar  Van  Cott,  Salt  Lake. 
Frank  Knox,  Salt  Lake. 
M.  H.  Walker,  Salt  Lake. 


John  Sharp,  Salt  Lake. 
Geo.  Y.  Wallace,  Salt  Lake. 
Charles  Crane,  Salt  Lake. 
F.  W.  Fishburn,  Brigham  City. 
Wesley  K.  Walton,  Murray. 
W.  E.  Rydalch,  Provo. 


APPOINTED  BY  GOVERNOR  PROCTOR,  OF  VERMONT. 
F.  G.  Howland,  Barre.  J.  M.  Boutwell,  Montpelier. 

Geo.  H.  Bickford,  Hardwick.  W.  H.  H.  Slack,  Springfield. 

F.  H.  Shepardson,  Richmond.  John  B.  Pecket,  Bradford. 

J.  E.  Buxton,  Middletown  Springs.  "~  Rev.  Andrew  S.  Bole,  Coventry. 
Perley  F.  Hazen,  St.  Johnsbury. 

APPOINTED   BY   GOVERNOR   SWANSON,   OF  VIRGINIA. 

E.  P.  Buford,  Lawrenceville.  E.   R.   Beckwith,   Petersburg. 

Jno.  Landstreet,  Richmond.  Pembroke  Pettit,  Palmyra. 

J.  N.  Wylie,  Danville.  R.  S.  Turk,  Staunton. 

H.  O.  Kerns,  Sutherlin.  W.   B.   Smoot,  Alexandria. 

Egbert  Leigh,  Jr.,  Richmond.  W.  E.  Homes,  Boydton. 


APPOINTED   BY   GOVERNOR 

John  J.  Coniff,  Wheeling. 
W.  B.  Irvine,  Wheeling. 
J.  G.  Hearne,  Wheeling. 
Henry  M.  Russell,  Wheeling. 
J.  T.  Carskadon,  Keyser. 
James  M.   Payne,  Charleston. 
William   H.  McGinnis,  Beckley. 
A.  J.  Mitchell,  Elizabeth. 
Wm.  G.  Worlev,  Kingwood. 


DAWSON,  OF  WEST  VIRGINIA. 

C.  E.  Haddox,  Moundsville. 

S.  G.  Pyle,  Sistersville. 

Alex.  McVeigh  Miller,  Alderson. 

B.  F.   Bailey,  Grafton. 

O.  A.  Ashburn.  West  Union. 

T.  J.  Parsons,  Moundsville. 

M.   K.   Duty,    Pennsboro. 

Wm.  Campbell,  Charles  Town. 


APPOINTED   BY  GOVERNOR  DAVIDSON,   OF  WISCONSIN. 


John  H.  Roemet,  Madison. 
Halford  Erickson,   Madison. 
B.  H.  Meyer,  Madison. 
William  J.  Hagenah,  Madison. 
John  R.  Commons,  Madison. 
Fred  Vogel,  Jr.,  Milwaukee. 
W.  N.  Fitzgerald,  Milwaukee. 


Fred  C.  Pritzlaff,  Milwaukee. 
August  Uihlein,  Milwaukee. 
Gustave  Pabst,  Milwaukee. 
Ludington  Patton,  Milwaukee. 
James  F.  Trottman,  Milwaukee. 
Wm.  Geo.  Bruce,  Milwaukee. 
E.  A.  Ross,  Madison. 


22 


APPOINTED    BY   GOVERNOR   MEAD,   OF   WASHNGTON. 
H.  A.  Fairchild,  Olympia.  J.  C.  Lawrence,  Olympia. 

Jesse  S.  Jones,  Olympia.  A.  E.  Perry,  Spokane. 

APPOINTED   BY  GOVERNOR  BROOKS,  OF  WYOMING. 
Geo.  M.  Winkelman,  Walcott.  Joseph  W.  Todd,  Buffalo. 

C.  E.  Hayden,  Cody.  Harry  B.  Henderson,  Cheyenne. 

Fred  R.  Blume,  Sheridan.  W.  E.  Mullen,  Cheyenne. 

Nellis  E.  Corthell,  Laramie.  C.  E.  Burke,  Cheyenne. 

C.  A.  Williams,  Guernsey. 

DELEGATES  APPOINTED  BY  ORGANIZATIONS. 

AFFILIATED   PRESIDENTS  AND  SECRETARIES  OF  COMMER- 
CIAL AND  TRADE  ORGANIZATIONS. 
Douglas  Dallam,  New  York  City.      Henry  Othmer,  Chicago. 
Paul  Blatchford,   Chicago.  G.  H.  Tompkins.  Chicago. 

S.  W.  Campbell,  Chicago.  T.  V.  Wooten,  Chicago. 

Gus  R.  Lott,  Chicago.  M.  Wulpi,  Chicago. 

J.  Newton  Nind,  Chicago.  A.  F.  Dotson,  Chicago. 

AMERICAN   BANKERS'   ASSOCIATION. 

John  H.  Holliday,  Indianapolis,  Ind.  F.  B.  Sears,  Boston,  Mass. 

D.  R.  Forgan,  Chicago.  J.  K.  Ilsley,  Milwaukee,  Wis. 

C.  G.  Dawes,  Chicago.  E.  F.  Chamberlain,  San  Antonio,  Tex. 

J.  J.  Sullivan,  Cleveland,  O.  William  Woodward,  New  York  City. 

H.  C.  Potter,  Jr.,  Detroit,  Mich.        F.  G.  Moffat,  Denver,  Colo. 

AMERICAN  BAR.ASSQCIATION. 
W.  U.  Hensel,  Lancaster,  Pa.  J.  W.  Warrington,  Cincinnati,  O. 

Thos.  J.  Kernan,  Baton  Rouge,  La.     Austen  G.  Fox,  New  York  City. 
Fred'k  W.  Lehmann,  St.  Louis,  Mo.  Talcott  H.  Russell,  New  Haven,  Ct. 
Clem't  Manley,  Winston-Salem,  N.  C.  Frank  Hagerman,  Kansas  City,  Mo. 
P.  W.  Meldrim,  Savannah,  Ga.  Charles  Monroe,  Los  Angeles,  Cal. 

John  G.  Milburn,  New  York  City.      E.  C.  Hughes,  Seattle,  Wash. 
George  R.  Peck,  Chicago.  Aldis  B.  Browne,  Washington,  D.  C. 

Moorfield  Storey,  Boston,  Mass.         George  T.  Page,  Peoria,  111. 
Charles  S.  Thomas,  Denver,  Colo. 

NATIONAL    BUSINESS  LEAGUE    OF    AMERICA. 

Alexander  H.  Revell,  Chicago.  Benjamin  J.  Rosenthal,  Chicago. 

E.  Allen  Frost,  Chicago.  La  Verne  W.  Noyes,  Chicago. 
Mather  Smith,  Chicago. 

NATIONAL  ASSOCIATION  OF  CLOTHIERS. 
Marcus  M.  Marks,  New  York  City.     Sidney   Lowenstein,    Chicago. 
Siegmund  B.  Sonneborn,  Baltimore.  Jacob  J.  Abt,  Chicago. 
Louis  E.  Kirstein,  Rochester,  N.  Y.    A.  W.  Becker,  Chicago. 
Louis  H.  Kohn,  Chicago.  August  Gatzert,  Chicago. 

Harry  Pflaum,  Chicago.  Albert  W.  Schloss,  Detroit,  Mich. 

Maurice  L.  Ash,  Chicago. 

23 


NATIONAL  WHOLESALE  DRUGGISTS'   ASSOCIATION. 

John  N.  Carey,  Indianapolis,  Ind.  F.  A.  Faxon,  Kansas  Cit"    Mo. 
Wm.  Jay  Schieffelin,  New  York  City.  C.  P.  Walbridge,  St.  Louis,  Mo. 

M.  N.  Kline,  Philadelphia,  Pa.  T.  F.  Main,  New  York  City. 

M.  Cary  Peter,  Louisville,  Ky.  I.  S.  Coffin,  New  York  City. 
W.  J.  Walding,  Toledo,  O.  C.  A.  West,  Boston,  Mass. 

G.  W.  Lattimer,  Columbus,  O.  E.  D.  Taylor,  Richmond,  Va. 

J.  W.  Morrison,  Chicago.  F.  E.  Holliday,  New  York  City. 
W.  A.  Hover,  Denver,  Colo. 

NATIONAL  RETAIL  DRUGGISTS'  ASSOCIATION. 
L.  P.  Larsen,  Chicago.  C.  A.  Storer,  Chicago. 

Jas.  H.  Wells,  Chicago.  Jos.  W.  Errant,  Chicago. 

E.  H.  Ladish,  Chicago.  Herman  Fry,  Chicago. 

T.  V.  Wooten,  Chicago.  Charles  M.  Carr,  Chicago. 

I.  M.  Light,  Chicago.  J.  T.  Crowley,  Chicago. 

AMERICAN   SOCIETY  OF  EQUITY. 
George  B.  Griggs,  Chicago. 

AMERICAN  FREE  TRADE  LEAGUE. 
Franklin  Pierce,  New  York  City.        Byron  W.  Holt,  New  York  City. 

NATIONAL  GRANGE,  PATRONS  OF  HUSBANDRY. 

N.  J.  Bachelder,  Concord,  N.  H.        Aaron  Jones,  South  Bend,  Ind. 

E.  B.  Norris,  Sodus,  N.  Y.  Geo.  B.  Horton,  Fruit  Ridge,  Mich. 
C.  J.  Bell,  Walden,  Vt.  Oliver  Wilson,  Peoria,  111. 

F.  A.  Derthick,  Mantua,  O.  George  P.  Hampton,  New  York  Citv. 

NATIONAL   WHOLESALE    GROCERS'   ASSOCIATION. 

Franklin  MacVeagh,  Chicago.  Francis  H.  Leggett,  New  York  City. 

A.  A.  Sprague,  Chicago. 

NATIONAL   RETAIL  GROCERS'   ASSOCIATION. 
C.  R.  Lott,  Chicago.  Sol.  Westerfield,   Chicago. 

NATIONAL  RETAIL  HARDWARE  ASSOCIATION. 
A.  T.   Stebbins,  Rochester,  Minn.       Paul  C.  de  Vol,  Council  Bluffs,  la. 
Frank  A.  Bare,  Mansfield,  O. 

THE   NATIONAL   ASSOCIATION   OF   AGRICULTURAL   IMPLE- 
MENT AND  VEHICLE  MANUFACTURERS. 
C.  L.  Mcintosh,  Racine,  Wis.  Wm.  Butterworth,  Moline,  111. 

Frederick  Robinson,  Racine,  Wis.        Walter  Rosenfield,  Moline,  111. 
Otis  W.  Johnson,  Racine,  Wis.  C.  E.  Erskine,  Racine,  Wis. 

Frank  Slosson,  Kenosha,  Wis.  C.  E.  Adams,  Marseilles,  111. 

C.  S.  Brantingham,  Janesville,  Wis.     P.  P.  Cooley,  Peoria,  111. 
Wm.  H.  Taylor,  Peoria,  111.  J.   B.  Bartholomew,  Peoria,  111. 

F.  G.  Allen,  Moline,  111.  J.  D.  Dort,  Flint,  Mich. 

U.  G.  Orcndorff,  Canton,  111.  J.  A.  Craig,  Janesville,  Wis. 

J.  M.  Studebaker,  South  Bend,  Ind.    J.  C.  Lund,  Racine,  Wis. 
Martin  Conrad,  Chicago.  H.  M.  Kinney,  Winona,  Minn. 

24 


SOUTHERN  LUMBERMEN'S  ASSOCIATION. 
II.  A.  Gorsuch,  Kansas  City,  Mo. 

YELLOW  PINE  MANUFACTURERS'  ASSOCIATION' 
George  K.  Smith,  St.  Louis,  Mo. 

THE  PROPRIETARY  ASSOCIATION. 
F.  J.  Cheney,  Toledo,  O.  John  W.  Kennedy,  Chicago. 

D.  M.  Newbro,  Detroit,  Mich.  H.  E.  Bucklen,  Chicago. 
O.  C.  Pinckney,  New  York  City.        H.  B.  Foley,  Chicago. 

A.  H.  Beardsley,  Elkhart,  Ind.  Geo.  L.  Douglass,  Chicago. 
H.  R.  Lindsey,  Paducah,  Ky. 

NATIONAL  ASSOCIATION  OF  PIANO  DEALERS. 
W.  H.  Daniel,  Buffalo,  N.  Y.  J.  W.  Teeple,  Chicago. 

J.  F.  Bowers,  Chicago.  W.  N.  Van  Metre,  Rockford,  111. 

C.  C.  Chickering,  Chicago.  A.  M.  Wright,  Chicago. 

Jonas  S.  Cleland,  Chicago.  Piatt  P.  Gibbs,  Chicago. 

E.  S.  Conway,  Chicago.  W.  L.  Bush,  Chicago. 

AMERICAN  PROTECTIVE  TARIFF  LEAGUE. 
Charles  A.  Moore,  New  York  City.    Wilbur  F.  Wakeman,  New  York  City. 

NATIONAL  ASSOCIATION  OF  STATE  RAILWAY  COMMIS- 
SIONERS. 
O.  H.  Hughes,  Columbus,  O.  Wm.  Kilpatrick,  Springfield,  111. 

Wm.  J.  Wood,  Indianapolis,  Ind.        J.  H.  Earle,  Greenville,  S.  C. 

B.  H.  Meyer,  Madison,  Wis. 

NATIONAL  SADDLERY  MANUFACTURERS'  ASSOCIATION. 
Charles  Kiper,  Chicago.  Herman  Kiper,  Chicago. 

T.  F.  Hopkins,  Rockford,  111.  Albert  Kuhlmey,  Chicago. 

C.  J.  Dyer,  Milwaukee,  Wis.  H.  R.  Rhinehart,  Chicago. 

WESTERN  ASSOCIATION   OF   SHOE  WHOLESALERS. 
W.  N.  Fitzgerald,  Milwaukee,  Wis.    E.  F.  Carpenter,  Chicago. 
R.  F.  Spencer,  St.  Louis,  Mo.  J.  Harry  Selz,  Chicago. 

Jackson  Johnson,  St.  Louis,  Mo.        H.  J.  MacFarland,  Chicago. 
H.  C.  Dovenmuehle,  Chicago.  J.  F.  Pratt,  Chicago. 

NATIONAL  ASSOCIATION  OF   STOVE   MANUFACTURERS. 

E.  C.  Hanrahan,  Chicago.  T.  J.  Hogan,  Chicago. 

Frederick  W.  Gardiner,  Chicago.  W.  G.  Henry,  Chicago. 
Wm.  H.  Cribben,  Chicago. 

INDEPENDENT    TOBACCO    MANUFACTURERS'   ASSOCIATION 

OF  THE  UNITED  STATES. 
Hugh  Campbell,  Richmond,  Va.        Albert  Weisert,  St.  Louis,  Mo. 
John  S.  Whalen,  Albany,  N.  Y. 

NATIONAL  WAGON  MANUFACTURERS'  ASSOCIATION. 
E.  W.  McCullough,  Chicago. 

25 


ILLINOIS  LUMBER  DEALERS'  ASSOCIATION. 
T.  V.  Jones,  Decatur,  111.  George  W.  Hotchkiss,  Chicago. 

W.  F.  Stevens,  La  Salle,  111. 

ILLINOIS  MANUFACTURERS'  ASSOCIATION. 
T.  Oehne,  Chicago.  A.  H.  Revell,  Chicago. 

C.  H.  Hill,  Chicago.  John  E.  Wilder,  Chicago. 

U.  G.  Orendcrff,  Canton,  111.  H.  F.  McCormick,  Chicago. 

Chas.  H.  Smith,  Aurora,  111.  H.  C.  Gardner,  Chicago. 

ILLINOIS  RETAIL  MERCHANTS'  ASSOCIATION. 
Sol.  Westerfield,  Chicago.  O.  M.  Kling,  Chicago. 

J.  De  Young,  Chicago.  J.  McCarthy,  Chicago. 

H.  Kestermeier,  Chicago.  Chas.  R.  Lott,  Chicago. 

J.  P.  Sullivan,  Chicago.  George  E.  Green,  Peoria,  111. 

INDIANA  STATE  BAR  ASSOCIATION. 
John  H.  Baker,  Goshen,  Ind.  Dan  W.  Simms,  Lafayette,  Ind. 

Emory  B.  Sellers,  Monticello,  Ind.      Ethan  A.  Dausman,  Goshen,  Ind. 
Daniel  Fraser,  Fowler,  Ind.    t  Samuel  Parker,  South  Bend,  Ind. 

Andrew  A.  Adams,   Columbia  City,  Geo.  W.  Holman,  Rochester,  Ind. 
Ind.  John  C.  Nelson,  Logansport,  Ind. 

Morton  S.  Hawkins,  Indianapolis. 

MICHIGAN  MANUFACTURERS'  ASSOCIATION. 
Hal.  H.  Smith,  Detroit. 

MISSOURI    STATE  BAR   ASSOCIATION. 

J.  McD.  Trimble,  Kansas  City,  Mo.  K.  B.  Randolph,  St.  Joseph,  Mo. 

A.  G.  Cochran,  St.  Louis,  Mo.  Wm.  A.  Rothwell,  Moberly,  Mo. 
O.  L.  Houts,  Warrensburg,  Mo. 

VIRGINIA  STATE  BAR  ASSOCIATION. 
Wyndham  R.  Meredith,  Richmond.     Jno.  W.  Daniel,  Lynchburg,  Va. 
Alfred  P.  Thorn,  Richmond,  Va.        Thos.  S.  Martin,   Scottsville,  Va. 
A.  Caperton  Braxton,  Richmond,  Va. 

WEST  VIRGINIA  BAR  ASSOCIATION. 
John  W.  Davis,  Clarksburg,  W.  Va.  George   W.    McClintock,    Charleston, 
W.  Scott  Meredith,  Fairmont,  W.  Va.      W.  Va. 

Wm.  T.  George,  Phillippi,  W.  Va.      George    C.    M.    Comas,    Huntington, 
Wm.  G.  Conley,  Kingwood,  W.  Va.       W.  Va. 

W.  R.  Dent,  Grafton,  W.  Va.  S.  B.  Stokes,  Williamson,  W.  Va. 

W.  H.  Cobb,  Elkins,  W.  Va.  E.  L.  Nuckolls,  Fayetteville,  W.  Va. 

BRICKLAYERS  AND  MASONS'  INTERNATIONAL  UNION. 
Wm.  J.  Bowen,  New  .York  City. 

STRUCTURAL  BUILDING  TRADES  ALLIANCE  OF  AMERICA. 
James  Kirby,  Chicago.  James  Hannahan,-  Chicago. 

Herman  Lilien,  Chicago.  Wm.  J.  Spencer,  Dayton,  O. 

26 


UNITED  BROTHERHOOD  OF  CARPENTERS  AND  JOINERS  OF 

AMERICA. 
Frank  Duffy,  Indianapolis,  Ind.  A.  M.  Watson,  Boston,  Mass. 

Wm.  G.  Schardt,  Chicago.  R.  E.  L.  Connolly,  Birmingham,  Ala. 

John  Walquist,  Minneapolis,  Minn.     John  Metz,   Chicago. 
Peter  Foley,  Edmonton,  Canada.        J.  D.  McKinley,  Chicago. 
D.  A.  Post,  Wilkesbarre,   Pa.  Joseph  Bondy,  Syracuse,  N.  Y. 

INTERNATIONAL  BROTHERHOOD  OF  ELECTRICAL  WORKERS 

James  J.  Reid,  Erie,  Pa.  R.  A.  Shields,  Chicago. 

James  P.  Noonan,  St.  Louis,  Mo.        E.  S.  Pratt,  Chicago. 

Michael  J.  Sullivan,  San  Francisco.    Wm.  A.  Kemp,  Chicago. 

Geo.  C.  King,  Buffalo,  N.  Y.  John  F.  Nichols,  Chicago. 

John  J.  McLaughlin,  E.  Boston,  Mass.Stephen  J.  Fay,  Chicago. 

Wm.  S.  Godshall,  Philadelphia,  Pa.  Ray   McElhaney,   Chicago. 

John  E.  O'Connor,  Paterson,  N.  J.     E.  J.  Hayes,  Chicago. 

James  Fitzgerald,  Des  Moines,  la.        V.  Haughn,  Chicago. 

W.  M.  Graham,  San  Antonio,  Tex.    Wm.  J.  O'Learv,  Chicago. 

H.  M.  Scott,  Los  Angeles,  Cal.  Charles  M.  Hall,  Chicago. 

INTERNATIONAL   UNION   OF   STEAM   ENGINEERS. 
O.  R.  Young,  New  York  City. 

GLASS   BOTTLE    BLOWERS'   ASSOCIATION    OF  THE   UNITED 

STATES  AND  CANADA. 
John  A.  Voll,  Zanesville,  O.  Harry  Jenkins,  Alton,  111. 

Frank  A.  Shunk,  Streator,  111. 

INTERNATIONAL  ASSOCIATION  OF  MACHINISTS. 
James  O'Connell,  Washington,  D.  C.  F.  D.  Anderson,  Chicago. 
Hugh  Doran,  Chicago.  John  Bee,  Chicago. 

J.  J.  Keppler,  Chicago.  John  D.  Farrell,  Chicago. 

A.  H.  Greener,  Chicago.  Wm.  M.  Rossell,  Chicago. 

C.  W.  Fry,  Chicago.  E.  Sarber,  St.  Louis,  Mo. 

D.  W.  Roderick,  Chicago. 

INTERNATIONAL    LONGSFIOREMEN,    MARINE    AND    TRANS- 
PORT WORKERS'    ASSOCIATION. 
Daniel  J.  Keefe,  Detroit,  Mich.  T.  V.  O'Connor,  Buffalo,  N.  Y. 

T.  J.  Dolan,  Chicago.  W.  B.  Jones,  Detroit,  Mich. 

W.  E.  Fuller,  Chicago. 

BROTHERHOOD   OF  RAILROAD  TRAINMEN. 
P.  H.  Morrisey,  Cleveland,  O. 

ORDER  OF  RAILWAY  CONDUCTORS  OF  AMERICA. 
W.  Stephens,  Kansas  City,  Mo.  W.  J.  Lacey,  Chicago. 

C.  H.  Hassell,  Springfield,  Mo.  W.  J.  Durbin,  Milwaukee,  Wis. 

W.  W.  Hutton,  Topeka,  Kan.  J.  B.  Carlin,  Wakefield,  Mich. 

Geo.  M.  Smith,  Bowie,  Md.  J.  O'Mara,  Indianapolis,  Ind. 

T.  A.  Gregg,  Roanoke,  Va.  Ashley  V.  Newton,  Buffalo,  N.  Y. 

27 


v" 


INTERNATIONAL  BROTHERHOOD  OF  STATIONARY  FIREMEN. 

C.  L.  Shamp,  Omaha,  Neb.  Louis  Becker,  Cincinnati,  O. 

George  Mier,  Cleveland,  O.  N.  W.  Moody,  Peoria,  111. 

Joseph  W.  Morton,  Chicago.  James  Cavanaugh,  Whiting,  Ind. 

William  Fisher,  Chicago.  J.  B.  Conroy,  St.  Louis,  Mo. 

M.  J.  Friel,  Chicago.  Geo.  C.  Purington,  Buffalo,  N.  Y. 

INTERNATIONAL  TYPOGRAPHICAL  UNION. 
Andrew  B.  Adair,  Chicago.  Chas.  Stevens,  Chicago. 

Jacob  Betten,  Chicago.  Hugh   Brady,  Chicago. 

Richard  Phillips,  Chicago.  John  C.  Harding,  Chicago. 

Jas.   D.  Coughlin,  Chicago.  Edw.  E.  Bessette,  Chicago. 

Geo.  J.  Knott,  Chicago.  Alexander  Spencer,  Chicago. 

CENTRAL  LABOR  UNION,  DISTRICT  OF  COLUMBIA. 
Sam  De  Nedrey. 

SYRACUSE    TRADES    AND    LABOR    ASSEMBLY. 
Joseph  Bondy.  A.  W.  Sherman. 

CHAMBER  OF  COMMERCE  OF  ALBANY,  N.  Y. 
Grange  Sard.  Donald  McDonald. 

William  T.   Mayer.  Edward  N.  McKinney. 

William  G.  Rice.  Curtis  N.  Douglas. 

MERCHANTS'    ASSOCIATION    OF    BOSTON,    MASS. 
Erwin  H.   Walcott. 

BOARD  OF   TRADE  OF   BIRMINGHAM,   ALA. 
C.  C.  Heidt.  Jno.  W.  Tomlinson. 

Roy  McCullough.  J.  A.  Van  Hoose. 

COMMERCIAL  CLUB  OF  BROCKTON,  MASS. 
Warren  A.  Reed.  Moses  A.  Packard. 

W.  L.  Douglas.  Charles  C.  Crooker. 

George  E.  Keith. 

COMMERCIAL   CLUB    OF  CEDAR  RAPIDS,  IA. 
Rev.  John  J.  Toomey. 

ASSOCIATION  OF  COMMERCE  OF  CHICAGO,  ILL. 

H.  C.  Barlow.  J.  P.  Byrne. 

T.  Edward  Wilder.  J.  E.  Defebaugh. 

Frederick  H.  Bode.  Ferd.  W.  Peck. 

Francis  T.  Simmons.  Homer  A.   Stillwell. 

Wm.  A.  Vawter.  W.  A.  Gibson. 
Joseph  Beifeld. 

CITIZENS'  ASSOCIATON  OF  CHICAGO,  ILL. 

'J.  Laurence  Laughlin.  William  F.  Hall. 

Eugene   E.    Prussing.  Frederick  W.  Burlingham. 
George  R.  Jenkins. 

28 


CIVIC  FEDERATION  OF  CHICAGO,  ILL. 
Victor  Elting.  H.  J.  Davenport. 

Walter  L.  Fisher.  William  H.  French. 

George  C.  Sikes. 

CITY   CLUB   OF   CHICAGO,   ILL. 

Joseph  H.   Defrees.  George  William   Dixon. 

Julius  Rosenwald.  Clinton  B.  Evans. 

Joseph  E.  Otis. 

COMMERCIAL  CLUB  OF  CHICAGO,  ILL. 
E.  A.  Bancroft.7  Frank  B.  Noyes. 

C.  H.  McCormick.  John  R.   Morron. 

E.  P.  Ripley. 

HAMILTON  CLUB  OF  CHICAGO,  ILL. 
A.  B.  Scully.  Robert  McMurdy. 

Ralph  R.  Lounsbury.  Daniel  F.  Crilly. 

W.  G.  Edens. 

IROQUOIS  CLUB  OF  CHICAGO,  ILL. 
James  Hamilton  Lewis.  John  C.  Richberg. 

Philip  Stein.  Emory   D.  Frazer. 

LEGISLATIVE  VOTERS'  LEAGUE  OF  CHICAGO,  ILL. 
Clifford  W.   Barnes.  Albert  A.  Sprague. 

George  E.  Cole. 

MARQUETTE  CLUB   OF   CHICAGO,   ILL. 
James   McNally.  Oliver  H.  Horton. 

Joseph   B.  Leake.  F.  T.  Vaux. 

Charles  M.  Foell. 

BUSINESS   MEN'S   LEAGUE  OF  CINCINNATI,  OHIO. 
Harry  L.  Gordon.  Edward  E.   Shipley. 

Guy  Mallon. 

CHAMBER  OF   COMMERCE  OF   CINCINNATI,  OHIO. 

F.  B.  Wiborg. 

MANUFACTURERS'  CLUB  OF  CINCINNATI,  OHIO. 
F.  B.  Wiborg.  D.  F.  Williams. 

CHAMBER   OF   COMMERCE  OF    CLEVELAND,    OHIO. 
Samuel  Mather.  Chas.  S.  Howe. 

BOARD  OF  TRADE  OF  COLUMBUS,  OHIO. 
George  W.  Lattimer. 

COMMERCIAL  CLUB   OF  COUNCIL   BLUFFS,   IOWA. 
C.  A.  Beno.  H.  B.  Jennings. 

R.  H.  Bloomer.  J.  G.  Wadsworth. 

P.  C.  De  Vol. 

29 


CHAMBER  OF  COMMERCE  OF  DECATUR,  ILL. 
A.  R.  Taylor.  John  A.   Montgomery. 

Wm.  Mellville  Wood.  Geo.  W.  Mueller. 

COMMERCIAL  CLUB  OF  DES  MOINES,  IOWA. 
Henry  Wallace. 

SINGLE   TAX  CORPORATION    OF   FAIRHOPE,   ALA. 
S.   H.   Comings. 

COMMERCIAL  CLUB  OF  FORT  MADISON,  IOWA. 
A.  P.  Brown.  W.  H.  Newlon. 

Chas.  H.  Finch.  J.  C.  Ehart. 

T.  T.  Hitch. 

COMMERCIAL  CLUB  OF  FORT  WAYNE,  IND. 
R.   S.  Taylor.  O.    N.    Guldlin. 

L.   M.   Foster.  C.  S.  Bash. 

C.  H.  Worden. 

BOARD  OF  TRADE  OF  GRAND  RAPIDS,  MICH. 
V.  A.  Wallin. 

BOARD  OF  TRADE  OF  HARTFORD,  CONN. 
John  D.  Browne.  John  M.  Holcombe. 

Atwood  Collins.  Daniel  R.   Howe. 

Henry  C.   Dwight. 

BOARD  OF  TRADE  OF  INDIANAPOLIS,  IND. 

D.  M.   Parry.  John  M.   Carey. 

BOARD  OF  TRADE  OF  JACKSONVILLE,  FLA. 
J.  W.  Archibald. 

COMMERCIAL  CLUB  OF  KANSAS  CITY,  MO. 
Frank  A.  Faxon. 

BOARD  OF  TRADE  OF  LAWRENCE,  MASS. 
M.  F.   Sullivan.  M.  A.   Scanlon. 

A.  B.  Sutherland.  C  H.  Littlefield. 

L.  E.  Bennick. 

BOARD  OF  TRADE  OF  LOUISVILLE,  KY. 
S.  Thruston  Ballard.  E.  J.  McDermott. 

Frank  N.  Hartwell.  Theo.  Ahrens. 

COMMERCIAL  CLUB  OF  LOUISVILLE,  KY. 
Geo.  L.  Sehon.  Geo.   H.   Laib. 

BOARD  OF  TRADE  OF  LYNN,  MASS. 
C.  Neal  Barney.  Benj.  F.   Spinney. 

M.  W.  Alexander.  Wm.   H.   Trecn 

J.  E.  Leavitt.  M.  V.  Brcsnahan. 

30 


FORTY  THOUSAND   CLUB   OF  MADISON,   WIS. 
Clark   Gapin.  Aug.    Rodin. 

B.  J.   Castle.  C.  P.  Carey. 
Paul  Reinsch.  Rev.  F.  P.  Galpin. 

MERCHANTS  AND  MANUFACTURERS'  ASSOCIATION  OF  MIL- 
WAUKEE,  WIS. 

August  H.  Vogel.  F.  L.   Sivyer. 

Patrick  Cudahy.  Julius  Gugler. 

August  Uihlein.  Caleb  E.  Johnson. 

I.  D.  Adler.  Fred.  Hoffman. 
Fred  M.  Prescott. 

COMMERCIAL  CLUB  OF  MUNCIE,  IND. 
L.  A.  Clark.  C.  B.  Fudge. 

C.  M.  Kimbrough.  C.  A.  Wood. 
W.  A.  McNaughton.  G.  E.  Dungan. 

T.  F.  Rose.  R.  L.  Williamson. 

A.  L.  Johnson.  F.  D.  Haimbaugh. 

COMMERCIAL  CLUB  OF  NEW  ALBANY,  IND. 
W.  S.  McLean.  S.  W.  Newberger. 

W.  W.  Godfrey.  Morris  Laub. 

Oscar  Barth. 

BOARD  OF  TRADE  OF  NEWARK,  N.  J. 
W.  W.  Trimpi.  James  N.  Reilly. 

Harlan  E.  Snodgrass. 

CHAMBER  OF  COMMERCE  OF  NEW  HAVEN,  CONN. 
Isaac  M.  Ullman.  Geo.  S.  Barnum. 

Edw.  P.  Root. 

CHAMBER  OF  COMMERCE  OF  NEW  YORK. 
Seth  Low.  George  Harvey. 

Andrew  Carnegie.  Herman  Ridder. 

William  J.  Schieffelin.  Clarence  H.  Mackay. 

Cornelius  Bliss.  Isaac  N.  Seligman. 

August  Belmont.  Frederick  D.  Underwood. 

MERCHANTS'  ASSOCIATION  OF  NEW  YORK. 
Nathan  Bijur.  Clarence  Whitman. 

Walter  C.  Kerr.  S.  C.  Mead. 

Marcus  M.  Marks.  Frederick  B.  DeBerard. 

Henry  R.  Towne. 

COMMERCIAL  CLUB  OF  OMAHA,  NEB. 
J.  L.  Kennedy.  H.  H.  Baldrige. 

Euclid  Martin.  C.  D.  Beaton. 

CHAMBER  OF  COMMERCE  OF  OSHKOSH,  WIS. 
Geo.  M.  Paine. 

3i 


TRADES  LEAGUE  OF  PHILADELPHIA,  PA. 

iMalilon  N.  Kline.  N.  B.  Kelley. 

Wm.  McAleer. 

CHAMBER  OF  COMMERCE  OF  PITTSBURG,  PA. 

James  W.  Kinnear.  S.  W.  Cunningham. 

CHAMBER  OF  COMMERCE  OF  RICHMOND,  VA. 
A.  Caperton  Braxton.  Wyndham  R.  Meredith. 

CHAMBER  OF  COMMERCE  OF  ROCHESTER,  N.  Y. 
R.  A.  Sibley.  L.   G.   Wetmore. 

H.  B.  Graves.  T.  H.  Mclnnerney. 

S.  B.  Hershey. 

BUSINESS  MEN'S  CLUB  OF  SAN  ANTONIO,  TEX. 
John  C.  Sullivan.  S.  D.  Brice. 

E.  J.  Altgelt.  Cornelius  Horan. 

Will  A.  Morris. 

COMMERCIAL    CLUB    OF    ST.    LOUIS,    MO. 

James  A.  Waterworth.  Charles  Nagel. 

Charles  W.  Knapp. 

MANUFACTURERS'  ASSOCIATION  OF   ST.   LOUIS,  MO. 
P.  M.  Hanson.  H.  H.  Jones. 

Eugene  McQuillin.  R.  D.  Lewis. 

W.  H.  Watters. 

MERCHANTS'  EXCHANGE  OF  ST.  LOUIS,  MO. 
James  A.  Waterworth.  R.  N.  Whitelaw. 

WEST  END  BUSINESS  MEN'S  ASSOCIATION  OF  ST.  LOUIS,  MO. 

Charles  F.  Ziebold.  J.  C.  Peers. 

L.  P.  Custer.  W.  A.  Guenzburger. 

J.  A.  Smith,  Jr.  E.  C.  Zausch. 

CHAMBER  OF  COMMERCE  OF  TOLEDO.  OHIO. 
A.  E.  Macomber. 

COMMERCIAL  CLUB  OF  TOPEKA,  KAN. 
John  E.  Frost. 

BOARD  OF  TRADE  OF  WILKES-BARRE,   PA. 
Henry  W.  Palmer. 

BOARD  OF  TRADE  OF  WILMINGTON,  DEL. 
W.  W.  Lobdell.  Thos.  H.  Savery. 

John  Richardson,  Jr.  R.  H.  Dunham. 

Anthony  Higgins. 

BOARD  OF  TRADE  OF  WORCESTER,  MASS. 
J.  Russell  Marble.  Clarence  W.  Hobbs. 


DELEGATES   AT   LARGE. 


A.  M.  Barnhart,  Chicago. 
A.  N.  Bradford,  Rock  Falls,  111. 
Gertrude  Beeks,  New  York  City. 
Dan  L.  Cease,  Cleveland,  O. 
John  S.  Crosby,  New  York  City. 
E.    S.   Crosette,    Davenport,   la. 
Thos.  M.  Debevoise,  New  York  City 
Ralph  M.  Easley,  New  York  City.   « 
Wade  H.  ElHs,  Columbus,  O. 
Roland  P.  Falkner,  New  York  City. 
Lewis  B.  Fisher,  Galesburg,  111. 
E.  Gaidzik,  Chicago. 
Robert  Geddes,  Indianapolis,  Ind. 
Geo.  L.   Groat,  Delaware,   O. 
Arthur  A.  Hay,  Indianapolis,  Ind. 
Franklin  H.  Head,  Chicago. 
Willard  E.  Hotchkiss,  Evanston,  111. 
S.  H.  Hughes,  St.  Louis,  Mo. 
G.  W.   Hull,  Jerome,  Ariz. 
C.  W.  Hunsche,  Chicago. 
Julian  W.  Mack,  Chicago. 
Hobart  L.  Marvin,  Garrett,  Ind. 
J.  M.  Mead,  Nashville,  Tenn. 
Robert  Mather,  New  York  City. 
Henry    C.    Metcalf,    Tufts    College, 
Mass. 


Wm.  A.  R.  Mitchell,  Chicago. 
Avery    C.    Moore,    Coeur    d'Alene, 

Idaho. 
A.  W.  Morrison,  St.  Louis,  Mo. 
Adolph  Nathan,  Chicago. 
Geo.  P.  Naumann,  Napierville,  111. 
.0.  E.  Olin,  Akron,  O. 
Frank  Parsons,  Boston,  Mass. 
Fred   N.   Peet,  Chicago. 
Wm.   Penje,   Chicago. 
John  B.   Phillips,  Boulder,  Colo. 

F.  H.  Randall,  Iowa  City,  la. 
C.  H.  Salmons,  Cleveland,  O. 
Alvin  H.  Saunders,  Chicago. 
James  F.  Sargent,  Chicago. 

G.  W.  Sindlinger,  Napierville,  111. 
Herbert  Knox  Smith,  Washington, 

D.  C. 
T.  Carl  Spelling,  New  York  City. 
Cloyd  D.  Sterling,  Redfield,  S.  D. 
Chas.  E.  Stevens,  Milwaukee,  Wis. 
L.  B.  Steward,  Chicago. 
Wm.   Tarkington,   Chicago. 
Chas.  J.  Traxler,  Minneapolis,  Minn. 
Stanley  Waterloo,  Chicago. 
R.   M.  Wilbur,  Chicago. 


33 


PROCEEDINGS 

First  Session  October  22,  10  A  M. 


The  National  Conference  on  Trusts  and  Combinations  held 
under  the  auspices  of  the  National  Civic  Federation  was  called 
to  order  at  10  o'clock  A.  M.,  on  Tuesday,  October  22,  1907,  in 
the  Music  Hall,  Fine  Arts  Building,  Chicago,  Illinois,  by  Dr. 
Nicholas  Murray  Butler,  President  of  Columbia  University  and 
Chairman  of  the  Industrial  Economics  Department  of  the  Na- 
tional Civic  Federation. 

In  opening  the  conference  Dr.  Butler  spoke  as  follows: 

On  behalf  of  the  National  Civic  Federation  it  is  my  agreeable 
duty  to  extend  a  cordial  greeting  to  the  delegates  who  have  as- 
sembled to  constitute  this  conference.  These  delegates  come  from 
every  part  of  our  country,  and  they  bear  credentials  which  entitle 
them  to  speak  for  large  bodies  of  opinion.  Chambers  of  Com- 
merce, Boards  of  Trade,  organizations  of  labor,  business  and  com- 
mercial organizations  of  every  type  are  here  represented.  We 
have  before  us  a  rare  opportunity  for  the  free  and  fair  inter- 
change of  views,  and  for  the  considerate  discussion  of  some  of 
the  questions  that  are  now,  and  for  some  time  past  have  been, 
uppermost  in  the  public  mind. 

It  is  a  noteworthy  characteristic  of  our  nation  that  large  as  is 
the  responsibility  committed  by  fundamental  law  to  organs  of 
government,  larger  still  is  the  responsibility  and  the  opportunity 
retained  by  the  people  themselves.  It  is  in  debates  and  discus- 
sions by  governmental  bodies  that  policies  which  public  opinion 
demands  are  cast  into  legislative  form  and  enacted  into  statute 
law;  but  it  is  by  bodies  such  as  this,  representing  the  voluntary 
assembling  of  hundreds  of  interested  citizens,  that  public  opinio:? 
itself  is  formed. 

We  are  here  to  try  to  shed  light  upon  some  of  the  most  diffi- 

35 


cult  economic  and  political  problems  of  our  time.  We  do  not 
expect  to  solve  them,  but  it  is  not  too  much  to  hope  that  we  may 
contribute  something  toward  their  solution.  These  problems  can- 
not be  settled,  however,  to  the  advantage  of  the  nation  as  a  whole 
if  we  attempt  to  solve  them  in  passion  or  in  partisanship.  We 
must  approach  them  fairly  and  with  open  minds,  as  becomes  in- 
telligent citizens  of  a  self-governing  nation. 

CORPORATIONS  BENEFICENT. 

One  of  the  most  beneficent  results  of  the  development  of  the 
nineteenth  century  was  the  rapid  growth  of  the  corporation  as 
an  instrument  for  carrying  on  industry  and  commerce.  The  cor- 
poration is  primarily  a  body  instituted  by  authority  of  the  State, 
which  permits  and  invites  the  co-operation  of  numbers  of  indi- 
viduals for  the  accomplishment  of  a  common  purpose,  toward 
which,  as  individuals,  they  could  do  little  or  nothing.  The  cor- 
poration was  clearly  created  by  the  State  for  the  benefit  of  the 
State.  It  was  intended  to  be  a  means  of  accomplishing  what 
would  not  otherwise  be  accomplished.  It  should  be,  and  in  the 
judgment  of  many  may  be  made  to  be,  a  means  whereby  the  sav- 
ings of  persons  of  small  means  are  combined  together  into  a  large 
capital  sum  for  the  purpose  of  carrying  on  some  phase  of  indus- 
try or  commerce  to  their  own  individual  benefit  and  to  the  public 
advantage. 

Experience  has  shown  us,  however,  that  we  have  not  been  en- 
tirely succesful  as  yet  in  adjusting  our  public  administration  and 
our  legal  theory  to  the  situation  which  the  multiplication  and 
growth  of  corporations  has  brought  about.  Not  only  has  there 
been,  in  far  too  many  cases,  a  sinister  alliance  between  those  who 
have  sought  governmental  privileges  for  the  corporations  which 
they  serve  and  those  who;  as  governmental  officers,  were  in  posi- 
tion to  influence  the  granting  of  such  privileges,  but  corporations 
themselves,  although  the  creatures  of  the  State,  have  seemed  to 
be  in  some  ways  beyond  the  power  of  the  State  to  control,  and 
outside  the  reach  of  its  authority.  Particularly  is  this  true  of 
those  most  important  bodies  which  are  known  as  public  service 
corporations.  It  will  hardly  be  denied  that  the  power  which  called 
the  corporation  into  existence  must,  in  self-defence  and  in  order 
to  sustain  an  equitable  relation  to  every  citizen,  so  supervise  and 
control  the  operations  of  the  public  service  corporation  that  the 
latter  shall  not  infringe  either  on  the  powers  of  the  State  itself 
or  on  the  rights  and  just  privileges  of  any  individual  citizen. 

36 


SIZE  OF  CORPORATIONS  NO   MENACE. 

My  own  opinion,  which  runs  counter  to  that  of  many  others  to 
whom  we  are  bound  to  listen  with  respect,  is  that  nothing  is 
necessarily  to  be  feared  from  a  corporation  because  of  its  size. 
The  American  people  have  not  been  afraid  of  large  undertakings, 
corporate  or  other.  A  small  corporation  may  so  entwine  itself 
about  the  operations  of  government — municipal,  county  or  State — 
that  its  very  existence  is  objectionable,  small  though  it  be.  The 
character  of  a  corporation  does  not  depend  upon  its  size,  but  upon 
the  principles  and  policies  which  actuate  its  management.  Cor- 
porations themselves  have  no  moral  qualities ;  it  is  corporate  offi- 
cers and  managers  who  are  good  or  bad,  honest  or  dishonest,  as 
the  case  may  be.  The  problem  of  creating  and  developing  a  pub- 
lic service  corporation  that  truly  serves  the  public  is  simply  the 
problem,  always  and  everywhere  present  in  our  life,  of  securing 
for  positions  of  trust  and  power  men  who  are  not  only  intelligent, 
but  upright ;  who  are  not  only  efficient,  but  honest.  It  is  not  com- 
bination and  co-operation  that  are  to  be  feared  and  antagonized, 
but  only  monopoly  and  discrimination. 

DIFFICULTIES  OF  REFORM. 

Problems  of  grave  importance,  not  only  legal  but  political  in 
the  highest  sense,  arise  when  we  attempt  to  fix  the  ways  and 
means  by  which  the  government  shall  control  and  supervise  pub- 
lic service  corporations.  Our  constitutional  limitations,  our  polit- 
ical traditions  and  past  party  differences,  and  the  complex  struc- 
ture of  our  whole  governmental  system,  with  its  State  and  national 
agencies,  make  the  problem  of  governmental  control  of  corpora- 
tions an  extremely  difficult  one.  There  are  those  who  think  they 
see  short  and  easy  methods  of  accomplishing  the  desired  end,  but 
my  prediction  is  that,  true  to  the  characteristics  of  our  people, 
we  shall  work  out  a  just  solution  of  these  involved  problems — not 
at  one  stroke  or  by  wholly  logical  processes,  but  step  by  step  and 
after  many  experiments,  and  that  not  a  few  unforeseen  difficulties 
will  have  to  be  surmounted  or  circumvented.  Above  all  else,  un- 
less we  propose  to  wreck  the  whole  economic  basis  on  which  our 
prosperity  and  our  happiness  rest,  we  must  have  a  care  that  we 
so  speak  and  so  act  as  not  to  disturb  that  faith  or  confidence 
which  civilized  man  has  in  his  fellows  and  upon  which  rests  the 
whole  enormous  structure  of  our  credit  system.  Destroy  that, 
and  there  will  not  be  many  public  service  or  other  corporations 
left  to  regulate  for  some  time  to  come. 

327139 


Y\  e  all  know  how  much  feeling,  and  what  just  feeling,  has  been 
aroused  in  the  United  States  by  corporate  mismanagement.  It 
is  difficult  to  speak  in  language  too  strong  of  the  usurpations  of 
power  and  the  larcenies  of  funds  which  have  been  committed  by 
corporate  officers.  But  let  us  not  lose  our  heads.  We  are  face  to 
face  with  economic  conditions  that  are  new,  and  with  economic 
abuses  that,  though  manifold,  have  grown  up  slowly  and  in  the 
dark.  There  is  ample  power  in  our  institutions,  in  our  constitu- 
tion and  our  laws  to  check  and  to  remedy  them  all.  It  is  the 
business  of  this  conference  to  invite  and  to  listen  to  expressions 
of  opinion  as  to  how  that  power  may  best  and  most  wisely  be 
exercised. 

DOES  THE  SHERMAN   ACT  NEED  AMENDMENT? 

The  attention  of  every  student  of  this  subject  is  of  necessity 
attracted  by  the  provisions  of  the  important  act  which  has  been 
upon  the  statute  book  for  seventeen  years,  known  as  the  Sherman 
Anti-Trust  Law.  That  law  represents  the  intention  which  existed 
at  the  time  of  its  passage  that  every  "contract,  combination  in  the 
form  of  trust  or  otherwise,  or  conspiracy,  in  restraint  of  trade 
or  commerce  among  the  several  States  or  with  foreign  nations," 
should  be  made  illegal.  Violation  of  the  law  was  made  a  criminal 
offence,  and  a  suitable  punishment  was  provided  for  any  person 
convicted  of  such  violation.  This  act  opened  the  door  to  entrance 
by  the  national  government  upon  a  new  field  of  activity.  As  it 
has  been  construed  by  the  courts,  this  act  is  of  most  far-reaching 
effect,  outrunning  indeed  the  expectations  and  wishes  of  those  who 
formulated  and  supported  it.  There  is  now  reason  to  believe  that  it 
commits  the  nation  to  a  policy  which  is  too  extreme,  to  a  policy 
that,  in  putting  an  end  to  certain  admitted  evils,  also  puts  an  end 
to  certain  demonstrable  benefits.  Many  of  us  believe  that  the  act 
unduly  exalts  the  principle  of  competition  and  fails  to  lay  due 
emphasis  upon  the  public  benefits  which  may  follow  from  prop- 
erly regulated  and  supervised  co-operation.  The  distinction  be- 
tween combinations  which  are  reasonable .  and  may  well  be  per- 
mitted and  those  which  are  unreasonable  and  must  at  all  hazards 
be  forbidden,  is  one  which  ought  not  to  be  surrendered  or  over- 
looked. 

Senator  Sherman,  of  Ohio,  whose  name  the  Anti-Trust  Act 
bears,  clearly  stated,  when  this  bill  was  under  consideration  by 
the  Senate,  that  it  did  not  "announce  a  new  principle  of  law,  but 
applies  old  and  well-recognized  principles  of  the  common  law  to 

38 


the  complicated  jurisdiction  of  our  State  and  Federal  govern- 
ments." 

It  would  appear  that  the  view  of  Senator  Sherman  has  not  been 
entirely  justified  by  events,  for  the  language  of  his  act,  as  in- 
terpreted by  the  courts,  has  gone  far  beyond  the  point  where  he 
thought  it  stopped.  It  is  a  most  important  question,  therefore, 
whether  the  time  has  not  come  when  this  act  should  be  amended  in 
order  to  relieve  not  corporations,  but  the  people,  from  limitations 
upon  their  business  activity  which  this  act  imposes,  although  in 
reality  they  are  not  necessary  in  the  public  interest.  In  other 
words,  cannot  the  American  people  secure  for  themselves  the  un- 
doubted benefits  which  come  from  co-operative  activity,  as  man- 
ifested in  corporations  and  by  agreements  between  corporations, 
without  in  any  way  lessening  the  protection  which  we  must  all 
desire  against  the  evils  which  have  demonstrably  followed  upon 
the  creation  of  great  corporations  and  upon  agreements  between 
them  in  restraint  of  trade  ?  It  is  not  combination  itself  so  much 
as  it  is  unfair  discrimination  which  should  arouse  our  criticism 
and  our  opposition. 

In  the  consideration  of  these  questions  and  the  others  which  are 
upon  our  program,  there  is  presented  a  wide  field  for  discussion 
and  ample  opportunity  for  the  exercise  of  statesmanship.  The 
American  people  have  shown  time  and  time  again  that  if  a  great 
issue,  in  particular  one  which  involves  moral  considerations,  con- 
siderations of  essential  justice,  is  clearly  presented  to  them,  they 
will  decide  it  right.  It  is  in  full  confidence  in  the  American  peo- 
ple and  the  justice  of  their  determinations,  when  considerately 
made,  that  we  should  endeavor  to  debate  the  various  questions 
which  this  conference  has  been  called  to  consider. 

At  the  conclusion  of  his  address  the  Chairman  announced  that 
the  National  Civic  Federation,'  which  had  called  the  conference 
and  had  arranged  for  its  opening  sessions,  desired  that  the  con- 
ference should  from  that  time  on  assume  the  management  of  its 
own  organization  and  the  conduct  of  its  business,  and  asked  for 
any  suggestions  from  the  conference. 

MR.  RALPH  M.  EASLEY :  As  stated  by  the  Chairman,  the 
conference  at  this  point  takes  upon  itself  the  direction  of  its  own 
affairs.  While  that  is  true  theoretically,  it  does  not  wholly  dis- 
charge the  Committee  on  Arrangements  from  its  obligations.  This 
committee  has  invited  the  Governors  of  the  States  and  the  Presi- 

39 


dents  of  various  organizations  to  send  delegates,  and  has  request- 
ed that  papers  be  prepared.  Now,  in  order  to  make  a  bridge  by 
which  the  work  may  pass  from  the  National  Civic  Federation  to 
the  conference  the  Committee  on  Arrangements  last  night  in- 
structed me  to  move  the  appointment  of  a  committee  of  fifteen 
on  Rules  and  Order  of  Business.  One  of  the  important  things 
which  this  committee  will  report  back  will  be  some  provision  for 
a  Committee  on  Resolutions.  It  will  probably  provide  that  this 
most  important  committee  shall,  in  accordance  with  the  invariable 
rule  at  all  of  our  meetings,  be  constituted  by  each  State  selecting 
its  own  member.  The  Committee  on  Arrangements,  after  considera- 
tion, did  not  deem  it  necessary  to  put  the  delegates  from  the  sev- 
eral States  to  the  trouble  of  selecting  a  member  for  the  first  com- 
mittee on  rules  and  order  of  business,  whose  work  would  be  largely 
technical  in  mapping  out  the  procedure  and  program  of  the  con- 
ference. 

I  move,  Mr.  Chairman,  that  a  Committee  of  Fifteen,  represent- 
ing various  sections  of  the  country,  be  appointed  by  the  chair  to 
report  at  the  afternoon  session  upon  rules  and  order  of  business, 
recommendations  for  officers,  etc. 

Motion  seconded  and  carried. 

THE  CHAIRMAN :  The  chair  will  endeavor  to  announce  the 
committee  before  the  close  of  the  morning  session.  What  is  the 
further  pleasure  of  the  conference? 

MR.  EASLEY :  The  Committee  on  Program,  representing  the 
Committee  on  Arrangements,  has  provided  a  tentative  program 
for  the  first  day's  session,  which  has  been  printed  in  the  papers  this 
morning.  As  the  committee  recently  ordered  by  the  conference 
cannot  make  its  report  for  at  least  some  hours,  the  Committee  on 
Arrangements  recommends  that  the  program  printed  in  the  morn- 
ing papers  be  followed  until  such  time  as  the  Committee  on  Rules 
and  Order  of  Business  shall  have  made  its  report. 

THE  CHAIRMAN :  Following  the  recommendation  and  ac- 
tion of  the  Committee  on  Organization,  the  chair  has  pleasure  in 
presenting  to  the  conference  the  Attorney-General  of  Ohio,  Hon. 

40 


Wade  H.  Ellis,  who  will  address  you  upon  the  subject,  " Present 
Principles  Enunciated  by  the  New  Organization  of  Attorneys- 
General." 

Hon.  Wade  H.  Ellis. 

Mr.  Chairman — I  am  here  to  represent  the  recently  organized 
association  of  Attorneys-General.  Therefore,  I  come  from  one 
association  to  another  association  to  discuss  the  evils  of  asso- 
ciations. 

This  conference,  like  the  new  organization  of  Attorneys-Gen- 
eral, which  you  have  invited  me  to  represent,  indicates  by  its  very 
existence  the  necessity  and  the  inevitableness  of  co-operation  in 
every  field  of  human  achievement.  V\  e  propose  a  study  of  com- 
binations, and  the  first  step  we  take  is  to  combine. 

Thus  we  find  two  important  facts  which  must  be  recognized 
and  accepted  before  any  progress  can  be  made  in  solving  the 
problem  of  the  trusts.  The  first  of  these  is  that  honest  co-opera- 
tion is  needed  to  right  the  wrongs,  and,  second,  that  honest  co- 
operation is  not  one  of  the  wrongs  to  be  righted. 

First,  then,  let  us  be  done  with  all  rivalry  between  State  and 
Federal  jurisdictions.  Let  us  indulge  no  timid  fears  about  the  | 
perpetuity  of  our  dual  form  of  government,  and  revive  no  buga- 
boos  of  a  past  generation  to  fright  the  souls  of  the  unwary.  The 
trust  question  cannot  be  fenced  up  by  State  lines.  Whether  we 
will  it  or  not,  it  has  become  a  national  cause,  and  it  will  have  to 
be  decided  in  a  national  forum.  Prosecuting  officers  of  the  coun- 
ties and  the  States  may  here  and  there  secure  local  or  temporary 
obedience  to  existing  laws — and  I  would  not  decry  their  zeal  or 
suggest  the  slightest  wavering  in  the  performance  of  their  duties — 
but  no  general  or  permanent  policy  will  ever  be  enforced  until 
the  Federal  Government  vindicates  its  authority  over  a  subject  as 
broad  as  its  domain. 

STATE  AND   NATION   SHOULD   CO-OPERATE,   NOT  CONFLICT. 

The  effort  should  be  rather  to  seek  one  effectual  remedy  than 
to  emphasize  a  conflict  between  many.  And  here  the  attitude  of 
the  Attorneys-General  must  not  be  misunderstood.  It  is  true  that 
their  association  at  St.  Louis  adopted  a  memorial  to  Congress  to 
withdraw  from  the  Federal  courts  jurisdiction  to  enjoin  the  pros- 
ecution of  actions  brought  to  enforce  State  laws,  thus  requiring 
that  all  who  bring  themselves  or  their  business  under  the  opera- 
tion of  such  laws,  and  who  invoke  the  protection  of  the  Federal 

4i 


Constitution  against  their  enforcement,  shall  first  submit  their 
claims  to  the  State  courts,  and  if  the  right  of  immunity  is  there 
denied,  shall  then  secure  the  review  guaranteed  in  the  Supreme 
Court  of  the  United  States.  But  there  are  no  anti-trust  laws  in- 
volved in  this  proposition.  With  respect  to  such  laws  the  At- 
torneys-General appreciate  the  greater  efficiency  of  Federal  pros- 
ecutions and  the  larger  benefits  to  result  therefrom ;  and  while  they 
have  not  evaded  their  own  obligations  under  the  statutes  and  pub- 
lic policy  of  their  own  States,  they  have  welcomed  every  oppor- 
tunity to  assist  the  national  authorities  in  the  great  work  now 
going  on  under  the  inspiration  of  the  highest  leadership  in  the 
land. 

Indeed,  even  with  respect  to  the  control  of  corporations  within 
the  States,  experience  has  shown  that  the  larger  the  field  upon 
which  the  contest  is  waged  the  greater  will  be  the  number  who  par- 
ticipate in  a  righteous  victory.  Thus,  where  certain  railroads  in  my 
own  State  were  directed  by  the  Ohio  commission  to  cease  discrim- 
inations in  favor  of  the  coal  mines  they  owned,  the  operators  who 
were  suffering  by  the  injustice  rejoiced  when  the  companies  dis- 
puted the  authority  of  the  State  as  an  interference  with  interstate 
commerce,  for  that  defense  gave  the  complainants  an  opportunity 
to  appeal  to  a  higher  tribunal  for  the  settlement  of  the  contro- 
versy, and  the  sweeping  decision  that  soon  came  from  the  Inter- 
state Commerce  Commission  benefited  not  the  mine  owners  of 
Ohio  alone,  but  established  a  rule  of  fair  dealing  which  protects 
every  shipper  in  the  country. 

Let  us  not  deny  that  the  union  of  capital  is  an  essential  element 
of  commercial  life.  Corporations  have  come  to  stay  in  this  coun- 
try. Men  will  put  their  money  together,  and  we  can  never  legis- 
late this  instinct  out  of  human  nature.  The  concentration  of  cap- 
ital results  in  economic  advantages  too  obvious  to  be  concealed  by 
any  statute  to  the  contrary.  This  of  itself  is  not  unlawful  to-day, 
and  it  would  be  folly  to  make  it  unlawful.  Corporations  will 
continue  to  strive  for  leadership  in  the  industry  to  which  their 
energies  are  devoted.  They  will  continue  to  construct  new  lines 
of  railroad,  to  open  new  mines,  to  build  new  plants,  to  reach  out 
for  business  in  all  directions,  to  make  money  and  divide  it  among 
their  stockholders.  This  of  itself  is  not  unlawful,  and  it  would 
be  folly  to  make  it  unlawful.  There  is  no  instance  yet  in  this 
country  where  one  man  or  one  corporation,  under  one  name,  has 
secured  the  complete  mastery  of  any  business  or  pursuit.  What- 
ever the  dim  future  may  hold  for  us,'  and  whatever  policy  may  one 

42 


day  be  adopted  for  exacting  a  juster  toll  from  large  incomes,  or 
limiting  the  capacity  to  perpetuate  accumulated  fortunes,  one 
thing  is  certain — there  is  no  menace  in  our  situation  to-day  that 
would  justify  any  limitation  whatever  upon  the  mere  amount  of 
money  or  property  which  any  individual  or  any  corporation  may 
acquire. 

MOST      EFFECTIVE      COMBINATION       IS      THAT      ORGANIZED 
THROUGH       STOCK       OWNERSHIP. 

Our  troubles  have  not  come  from  the  overwhelming  concentra- 
trion  of  wealth  in  the  hands  of  any  one  man  or  of  any  one  cor- 
poration. Though  the  possibility  of  this  be  admitted,  its  concep- 
tion involves  the  surrender  of  the  chief  characteristics  of  human 
nature.  The  capacity  of  a  single  individual,  or  even  of  a  single 
corporation,  seems  restrained  by  a  law  of  its  own  limitations.  But 
more  than  this,  monopoly  seems  self-destroying  whenever  it  comes 
frankly  into  the  open.  The  very  attempt  to  absorb  any  trade  or 
traffic  under  one  bold  command  incites  revolt  and  provokes  com-, 
.petition.  It  is  only  when  monopoly  hides  that  it  is  secure.  Thus  I 
the  evils  of  commercial  restraint,  which  now  beset  us,  have  not 
come  about  by  any  corporation  occupying  the  whole  field  of  a 
given  industry,  but  solely  by  a  combination  of  corporations,  under 
one  form  or  another,  maintaining  separate  organizations,  present- 
ing a  show  of  competition  and  securing  that  control  which  no  one 
of  them  was  strong  enough  to  encompass. 

First,  there  was  the  agreement  between  competing  companies. 
But  in  the  larger  field  of  trust  operations  this  has  been  discarded, 
not  only  because  it  encountered  the  condemnation  of  the  courts, 
but  because  it  was  not  effective.  Then  came  at  last  the  present 
form  of  combination  through  the  ownership  or  control  of  the 
stock  of  the  allied  companies.  This  is  the  most  effective,  the  most 
invidious  and  the  cheapest  of  all  combinations  in  restraint  of 
trade.  It  is  the  most  effective,  because  while  agreements — and 
especially  unlawful  ones — may  easily  be  broken,  a  transfer  of  the 
stock  puts  the  bargain  beyond  the  power  of  any  conspirator  to 
escape.  It  is  the  most  invidious  because  while  it  conceals  all,  it 
fears  no  exposure.  It  is  the  cheapest,  because  it  requires  less 
money  to  buy  a  controlling  interest  in  the  stock  of  competing  com- 
panies than  it  does  to  buy  their  property,  and  yet  the  promoters 
have  the  use  of  the  investment  of  all  the  minority  holders  in  all 
the  corporations  brought  under  their  control.  In  fact,  it  generally 
requires  no  money  at  all,  for  the  stock  in  the  subsidiary  companies 

43 


is  paid  for  in  the  stock  of  the  holding  company.  And  thus  a  vast 
industry  is  brought  under  the  domination  of  manipulators  whose 
circulating  medium  would  not  be  a  legal  tender  anywhere  except 
on  the  stage. 

If  this  combination  of  separate  corporations,  through  stock 
ownership,  can  be  destroyed,  the  chief  source  of  our  present 
troubles,  at  least,  will  no  longer  infect  the  life  of  trade.  Once  re- 
quire that  every  corporation  shall  attend  strictly  to  its  own  busi- 
ness, in  its  own  name,  and  we  need  never  fear  an  unnatural  con- 
centration of  wealth. 

THE     STATES     THEMSELVES     ARE     RESPONSIBLE     FOR     THE 
DEVELOPMENT     OF     THE     "HOLDING     COMPANY." 

|  How  did  this  evil  of  corporate  ownership  of  the  stock  of  other 
/corporations  arise?  V\  ho  is  responsible  for  it?  The  States  them- 
selves gave  birth  to  the  system.  It  is  simply  the  exercise  of  a  new 
corporate  power,  never  before  existing,  and  only  recently  granted 
by  express  statutes.  It  was  brought  about,  of  course,  by  some  of 
the  large  corporate  interests,  but  the  States  were  persuaded  that 
they  were  inviting  capital  by  conferring  more  liberal  powers  upon 
corporations  than  those  which  existed  at  common  law,  and  some 
of  the  States,  without  any  hope  of  actual  investments,  seem  to 
have  been  actuated  solely  by  a  desire  to  earn  incorporation  fees. 
Thus  was  adopted  the  modern  policy,  expressed  in  the  statutes 
of  a  number  of  American  States,  that  corporations  organized  un- 
der the  laws  of  such  States  shall  have  power  to  own  the  stocks  in 
other  corporations.  The  most  conspicuous  of  those  States  which 
have  thus  departed  from  the  common  law — most  conspicuous  be- 
cause it  offers  other  inducements  for  incorporation  and  because 
of  the  great  number  of  modern  trusts  which  have  been  formed 
under  its  statutes— is  New  Jersey.  But  New  York,  Connecticut, 
Maine,  Delaware  and  one  or  two  other  States  also  authorize  one 
corporation  to  own  the  stock  of  another  without  regard  to  the 
business  in  which  they  may  be  engaged.  West  Virginia  and  Min- 
nesota permit  this  only  with  the  consent  of  the  stockholders  of  the 
owning  company.  Georgia,  Indiana  and  Mississippi  expressly 
forbid  it,  while  nearly  all  the  other  States  forbid  such  stock  own- 
ership by  not  granting  the  necessary  power  to  corporations  or- 
ganized under  their  laws.  Ohio,  I  regret  to  say,  has  compromised 
on  ^  the  question  by  permitting  one  corporation  to  hold  the  stock 
in  "other  kindred  and  non-competing  corporations,"  with  a  further 
restriction  that  such  ownership  must  not  violate  the  anti-trust 

44 


statute.  What  are  "kindred'*  and  at  the  same  time  "non-compet- 
ing" corporations,  the  ownership  of  whose  stock  in  a  holding 
company  will  not  produce  a  monopoly  of  business,  has  never  been 
judicially  determined. 

THERE    IS    NO    INHERENT    POWER    IN    ONE    CORPORATION    TO 
OWN  THE  STOCK  OF  ANOTHER. 

These  statutes,  deliberately  enacted  by  several  of  the  States,  are 
the  sole  source  of  the  power  of  one  corporation  to  own  the  stock 
of  another.  There  is  no  such  power  at  common  law.  The  courts 
have  held  with  practical  unanimity,  from  the  earliest  time  to  the 
present  day,  that  in  the  absence  of  an  express  grant  of  authority 
so  to  do,  no  corporation  has  any  power  to  buy,  sell,  hold  or  deal 
in  either  its  own  stock  or  in  the  stock  of  any  other  corporation. 
(1)  In  other  words,  the  right  to  own  corporate  stock  is  not  a  1 
natural  or  implied  incident  of  corporate  power.  The  reason  for  * 
this  time-honored  principle  of  the  common  law  is  most  obvious. 
Corporations  are  organized  for  certain  specific  purposes.  Their 
obligation  to  their  stockholders  and  to  the  public  is  to  devote  the 
funds  entrusted  to  their  care  to  the  prosecution  of  the  business  in 
which  they  are  engaged.  If  a  corporation  can  deal  in  its  own 
stock  it  can  not  only  repress  the  value  of  that  stock  in  order 
to  get  it  at  a  good  price,  it  can  not  only  defeat  the  security  of  its 
creditors  who  rely  upon  the  duty  of  its  stockholders  to  discharge 
their  obligations  to  the  corporation,  but  it  can  destroy  the  very 
business  in  which  it  was  organized  to  engage.  If  a  corporation 
can  own  or  deal  in  the  stock  of  other  corporations,  it  can  not  only 
divert  the  funds  under  its  control  from  the  purposes  for  which 
they  were  contributed,  but,  most  baleful  of  all,  it  can  destroy  all 
competition  in  the  industry  which  the  charter  of  the  State  em- 
powers it  to  promote.    These  are  the  reasons  invariably  given  by 

(!)  Green-Bryce's  Ultra  Vires,  p.  95;  Citizen's  State  Bank  v.  Hawkins, 
71  Fed.  369;  First  Nat.  Bank  v.  Nat.  Exchange  Bank,  92  U.  S.  122;  Peo- 
ple v.  Chicago  Gas  Trust  Co.,  130  111.  268;  Cal.  Bank  v.  Kennedy,  167 
U.  S.  362;  De  la  Vergne  Co.  v.  Germ.  Sav.  Inst,  175  U.  S.  40;  Ry.  Co.  v. 
Iron  Co.,  46  O.  S.  44;  Lanier  Lumber  Co.  v.  Rees,  103  Ala.  622;  Straus 
v.  Eagle  Ins.  Co.,  5  O.  S.  59;  Coppin  v.  Greenlees  &  Ransom  Co.,  38  O.  S. 
275;  Franklin  Bank  v.  Com.  Bank,  36  O.  S.  350;  Railroad  Co.  v.  Hinsdale, 
45  O.  S.  556;  Central  Ry.  Co.  v.  Collins,  40  Ga.  582;  Hood  v.  Railway  Co., 
22  Ct.  1 ;  Franklin  Co.  v.  Lewiston  Inst.,  68  Me.  43 ;  Milbank  v.  R.  R.  Co., 
64  How.  Pract.  20;  Pierson  v.  R.  R.,  62  N.  H.  537;  Hazelhurst  v.  Rail- 
road, 43  Ga.  13;  Nassau  Co.  v.  Jones,  95  N.  Y.  115;  Elkins  v.  Ry.  Co.,  36 
N.  J.  Eq.  5;  Marble  Co.  v.  Harvey,  92  Tenn.  115;  Berry  v.  Yates,  24 
Barb.  199;  People  v.  Pullman  Pal.  Car  Co.,  175  111.  125. 

45 


the  courts  in  support  of  that  wholesome  public  policy  which  de- 
nies to  corporations,  as  an  incident  of  their  express  powers,  the 
right  to  go  into  the  stock- jobbing  business.  The  Supreme  Court 
of  the  United  States,  in  the  case  of  the  First  National  Bank  v. 
the  National  Exchange  Bank  (*),  has  declared  that  national  banks 
which  are  incorporated  under  Congressional  statutes  have  no 
power  to  buy  the  stocks  of  other  corporations,  and  the  Federal 
courts  have  held  (2)  that  one  national  bank  has  no  power  to  pur- 
chase the  stock  of  another  national  bank.  In  the  celebrated  Chi- 
cago Gas  Trust  case  (3)  it  was  held  that  even  where  the  corpora- 
tion assumed,  by  the  express  terms  of  its  articles,  the  right  to  own 
the  stock  in  another  corporation  this  power  could  not  be  exer- 
cised because  it  was  not  conferred  by  the  legislature  of  the  State. 
Railroads  have  repeatedly  been  held  to  possess  no  power,  in  the 
absence  of  statute,  to  buy  or  hold  or  vote  the  stock  of  other  rail- 
roads. (4)  So  with  insurance  companies.  (5)  So  also  with  man- 
ufacturing, industrial  and  trading  companies.  (6)  The  New 
York  courts  (7)  have  held  that  in  the  absence  of  a  statute  one 
corporation  has  no  power  to  purchase  the  stock  of  another,  and 
may  be  enjoined  by  its  own  stockholders  from  holding  or  voting 
such  stock.  Yet  the  legislature  of  New  York  has  given  the 
power  which  its  courts  denied  upon  grounds  of  public  policy. 
All  these  cases  have  been  decided  upon  the  principle  that  the 
ownership  of  stock  in  another  corporation  was  a  diversion  of 
corporate  funds,  and  most  of  them  have  expressly  declared  that 
such  ownership  was  unlawful  because  it  promotes  monopoly.  (8) 

THE  STATES  WHICH  DENY  SUCH  OWNERSHIP   OF  STOCK  ARE 
POWERLESS  TO  PROTECT  THEMSELVES. 

What  is  the  result  of  this  recent  grant  of  power  by  some  of  the 
States  to  the  corporations  organized  under  their  laws?  If  New 
Jersey  incorporates  a  company  with  all  the  powers  that  State  con- 
fers the  company  may  buy  all  the  stock  in  all  the  corporations 
engaged  in  the  same  business  in  Massachusetts  or  Illinois,  where 


(1)  92   U.    S.    122. 

(2)  Cit.  State  Bank  v.  Hawkins,  71  Fed.  369. 

(3)  130  111.  268. 

(4)  Central  R.  R.  Co.  v.  Collins,  40  Ga.  582,  and  cases  cited. 

(5)  Berry  v.  Yates,  24  Barb.  119. 

(6)  See  cases  heretofore  cited. 

(7)  Milbank  v.  Railroad,  64  How.  Pract.  20. 

(8)  Marble  Co.  v.  Harvey,  92  Tenn.  115,  and  cases  cited. 

46 


such  purchase  of  stock  is  forbidden,  and  Massachusetts  and  Illi- 
nois will  be  powerless  to  protect  themselves  or  their  people.  The 
New  Jersey  companies  will  not  be  within  their  jurisdiction.  The 
ownership  of  stock  by  a  corporation  of  one  State  in  a  corporation 
of  another  State  is  not  "doing  business"  in  the  latter  State,  (*■) 
Of  course  a  State  might  forbid  its  corporations  from  permitting 
those  of  other  States  to  own  and  vote  their  stock,  and  Ohio  is 
now  insisting  that  such  control  is  a  violation  of  her  laws  by  the 
Ohio  corporations  whose  stock  is  thus  owned.  But  this  is  a 
remedy  difficult  of  enforcement,  and  one  that  would  lead  to  an 
unnecessary  interference  with  business  relations  between  the 
States,  as  well  as  produce  a  hazardous  conflict  in  public  policy. 

The  present  situation  is  intolerable.  The  corporate  charters  as 
now  issued  by  some  of  the  States  are  no  longer  mere  grants  of 
power  to  engage  in  business.  They  are  commissions  to  destroy 
business.  In  the  manner  in  which  they  are  used  to  exploit  in- 
dustries and  stifle  competition  among  the  people  of  unoffending 
sister  States  they  are  more  like  the  ancient  letters  of  "marque  and 
reprisal,"  which  authorized  adventurous  privateers  to  prey  upon 
the  commerce  of  the  seas. 

ALL  THE  CHIEF  COMBINATIONS  NOW  IN  EXISTENCE  OPERATE 
THROUGH  STOCK  OWNERSHIP. 

Passing  the  matter  of  railroad  combinations,  as  to  which  it  may 
be  said  that  through  stock  ownership  the  control  of  all  American 
lines  is  now  concentrated  in  seven  groups  of  parent  properties, 
we  are  chiefly  concerned  with  the  practical  use  that  has  been  made 
of  the  new  corporate  power  by  the  largest  and  strongest  of  our 
manufacturing  and  industrial  enterprises. 

The  United  States  Steel  Corporation,  organized  under  the  laws 
of  New  Jersey,  with  a  capital  stock  of  $1,100,000,000,  owns  a 
majority  of  the  stock  of  eleven  subsidiary  companies,  most  of 
which  themselves  own  stock  in  other  lesser  companies,  and  con- 
trols industries  scattered  over  the  entire  country  under  different 
styles  and  corporate  names.  This  corporation  owns  or  manages 
213  manufacturing  and  transportation  plants  and  forty-one  mines 
located  in  eighteen  different  States;  it  has  more  than  1,000  miles 
of  railroad  tracks  to  ore,  coke  and  manufacturing  properties,  and 
a  lake  fleet  of  112  vessels.     This  stock  ownership  gives  it  control 


(!)  Commonwealth  v.  Standard  Oil  Co.,  10  Pa.  St  119. 

47 


of  hundreds  of  millions  of  capital  that  is  not  represented  by  its 
own  billion  dollars  of  stock.  (1) 

The  Amalgamated  Copper  Company,  incorporated  in  New  Jer- 
sey, has  no  asset  whatever  except  the  stocks  of  other  corporations. 
It  owns  all  the  stock  of  four  operating  companies  and  a  control- 
ling interest  in  seven  others,  and  has  taken  them  over  by  an  issue 
of  $155,000,000  of  its  own  stock. 

The  American  Smelting  and  Refining  Company,  organized  un- 
der the  laws  of  New  Jersey,  controls  the  business  of  thirteen  cor- 
porations, in  which  it  either  owns  the  entire  stock  or  a  majority 
interest.  Associated  with  it  are  the  American  Linseed  Company, 
the  National  Lead  Company  and  the  United  Lead  Company,  and 
they  together  control  twenty-eight  concerns  and  ninety-three 
affiliated  corporations. 

The  Standard  Oil  Company,  incorporated  in  New  Jersey,  with 
a  capital  stock  of  $110,000,000,  controls,  directs  and  manages 
more  than  seventy  corporations  through  its  possession  of  a  ma- 
jority of  their  stock.  Some  of  these  companies  own  stock  in  still 
other  corporations,  and  all  together  the  combine  operates  more 
than  400  separate  and  distinct  properties,  thus  monopolizing  90 
per  cent,  of  the  export  oil  trade  and  84  per  cent,  of  the  domestic 
trade.  The  market  value  of  its  capitalization  is  about  $650,000,- 
000,  and  all  this  vast  property  was  brought  together  under  one 
head  without  the  payment  of  a  single  dollar  of  cash,  the  whole 
consolidation  being  effected  through  the  issue  of  stock  in  the  hold- 
ing company  in  payment  of  stock  in  the  companies  that  are  held. 

The  United  Gas  Improvement  Company,  incorporated  in  Penn- 
sylvania, own  stock  in  thirty  corporations  doing  the  character  of 
business  for  which  it  was  organized,  and  in  addition  to  this  is 
interested  in  numerous  street  railway  properties,  including  the 
New  York  City  surface  railways.  With  it  is  allied  the  Public 
Service  Corporation  of  New  Jersey  and  the  Rhode  Island  Securi- 
ties Company,  which  last  named  owns  all  the  stock  of  the  Rhode 
Island  Company,  which  again  has  leased  for  999  years  several  of 
the  most  important  railroad  companies  doing  business  in  that 
State.  The  power  of  this  corporation,  through  this  system  of 
stock  ownership,  is  scarcely  calculable,  and  the  value  of  proper- 
ties controlled  would  equal  hundreds  of  millions,  although  its 
own  capital  stock  is  but  $36,000,000. 

The  American  Tobacco  Company,  organized  under  the  laws  of 
New  Jersey,  with  a  capital  stock  of  $40,000,000,  practically  con- 

(!)  Moody's  Truth  About  the  Trusts,  135  et.  seq. 

48 


trols  the  whole  market  through  its  ownership  of  the  stock  of  in- 
numerable other  corporations. 

The  International  Harvester  Company,  incorporated  in  New 
Jersey,  with  a  capital  stock  of  $120,000,000,  while  probably  not 
a  holding  company,  maintains  most,  if  not  all,  the  corporations 
which  it  has  bought  out,  and  they  are  operated  as  if  they  were 
distinct  and  competing  concerns. 

The  American  Sugar  Refining  Company,  incorporated  in 
New  Jersey,  with  a  common  stock  of  $40,000,000,  controls  fifty- 
three  other  corporations. 

The  American  Telegraph  and  Telephone  Company,  incor- 
porated in  New  York,  with  a  capital  stock  of  $250,000,000,  con- 
trols, through  stock  ownership,  thirty-five  subsidiary  corpora- 
tions. 

The  Western  Union  Telegraph  Company  owns  stock  in 
twenty-four  other  corporations ;  the  Distillers'  Security  Com- 
pany owns  90  per  cent,  of  the  stocks  of  the  Distilling  Company 
of  America,  and  has  acquired  ninety-three  plants,  representing 
60  per  cent,  of  the  industry ;  the  Philadelphia  Rapid  Transit 
Company  owns  the  stock  of  twelve  elevated  and  street  railway 
companies ;  the  Brooklyn  Rapid  Transit  Company  owns  the 
stock  of  seven  others ;  the  Metropolitan  Securities  Company  of 
New  York  owns  the  stock  of  many  traction  companies,  and  the 
controlling  interest  in  others ;  the  Inter-State  Railways  of  New 
Jersey  own  all  the  stock  of  the  United  Power  and  Transporta- 
tion Company,  which  latter  company  controls  the  capital  and 
franchises  of  about  forty  other  projected  companies  in  New 
Jersey  and  Pennsylvania;  while  the  International  Mercantile 
Marine  Company  of  New  Jersey  owns  a  majority  of  the  shares 
of  many  of  the  most  important  steamship  companies  whose  ves- 
sels cross  the  Atlantic  Ocean. 

These  are  but  a  few  instances  of  the  promotion  of  combina- 
tions through  stock  ownership.  It  would  be  improper  to  con- 
demn all  or  any  of  these  gigantic  enterprises  simply  because 
they  have  exercised  the  power  expressly  given  them  by  the 
States  of  their  creation.  As  to  some  of  these  corporations, 
actions  are  now  pending  in  State  or  Federal  jurisdictions  to  test 
the  validity  of  their  organization,  and  it  is  not  intended  here 
to  discuss  the  lawfulness  of  the  acts  of  any  of  them. 

The  one  thing  important  to  make  clear  is  that  not  a  single 
combination  here  named,  nor  any  other  of  the  larger  and  more 
powerful  monopolies,  could  ever  have  been  organized  or  devel- 

49 


oped  if  their  promoters  had  been  without  power  to  effect  the 
concentration  of  capital  through  the  stock  ownership  of  separate 
corporations. 

CONGRESS    CAN    AND    SHOULD    DENY    TO    INTERSTATE    COM- 
MERCE CORPORATIONS   THE  POWER  TO  OWN  STOCK  IN 
OTHER  CORPORATIONS. 

Now,  if  the  present  combinations  which  threaten  our  indus- 
trial freedom  have  been  brought  about  chiefly  or  largely 
through  the  exercise  of  powers  conferred  by  some  of  the  States 
upon  corporations  to  own  the  stock  of  other  corporations,  why 
is  not  the  remedy  to  be  found  in  returning  to  the  good  old 
common  law  rule  that  every  corporation  must  attend  to  its  own 
business,  and  its  own  business  alone?  And  if  the  chief  obstacle 
to  the  administration  of  anti-trust  laws  by  the  States  has  been 
the  lack  of  jurisdiction  over  corporations  engaged  in  inter- 
state commerce,  but  chartered  by  other  States  than  those  whose 
laws  they  have  violated,  why  would  it  not  be  wise  for  the  Fed- 
eral Government  to  deny  to  interstate  corporations  the  cor- 
porate power  of  buying  the  stocks  of  others  or  permitting  their 
stocks  to  be  owned  or  voted  by  others? 

Can  there  be  any  doubt  as  to  the  authority  of  Congress  to 
enact  such  general  law?  Certainly  the  fourth  article  of  the  con- 
stitution, which  provides  that : 

"The  citizens  of  each  State  shall  be  entitled  to  all  the 
privileges    and    immunities    of    citizens    in    the    several 
States," 
would  not  forbid  Congress  to  restrict  the  powers  of  corpora- 
f  tions  engaged  in  interstate  commerce ;  first,  because  such  com- 
merce is  not  a  privilege  or  immunity  in  the  State,  but  better  still 
because  the  word  "citizen"  as  here  used  has  been  held  not  to 
apply  to  corporations  at  all.     (-1) 

Congress  has  been  given  the  express  power  to  "regu- 
late commerce    *     *     *    among  the  several  States,"  and 
(2)         "to  make  all  laws  which  shall  be  necessary  and  proper 

for  carrying  into  execution" 
the  powers  conferred  upon  the  Government.     The  power  thus 


(1)  Paul  v.  Virginia,  8  Wall.  168;  Ducat  v.  Chicago,  10  Wall.  410; 
Liverpool  Ins.  Co.  v.  Massachusetts,  10  Wall.  567;  Western  Union  Tel. 
Co.  v.  Mayer,  28  O.  S.  521. 

(2)  Art.  I,  Sec.  8,  United  States  Constitution. 

50 


conferred  upon  Congress  is  absolute  and  it  is  exclusive  when- 
ever exercised.  It  has  no  limitations  whatever,  except  those 
to  be  found  in  the  instrument  which  grants  it.  It  may  create 
corporations  itself  as  instrumentalities  for  carrying  out  its 
powers.  It  may  forbid  the  States  to  create  such  corporations. 
It  may  forbid  interstate  commerce  altogether  in  any  instance 
in  which  the  welfare  or  safety  of  the  people  demand  it.  Cer- 
tainly these  powers  include  the  right  to  say  upon  what  terms 
interstate  commerce  shall  be  conducted  and  to  limit  the  capacity 
of  interstate  corporations  in  any  and  every  respect,  and  espe- 
cially in  those  respects  in  which  their  corporate  functions  are 
being  so  exercised  as  to  stifle  the  very  commerce  in  which  they 
are  engaged, 

It  is  wholly  unnecessary  in  support  of  the  proposition  that 
Congress  can  prevent  interstate  commerce  corporations  from 
dealing  in  corporate  stocks  to  advocate  another  and  different 
proposition  that  Congress  can  usurp  the  police  powers  of  the 
States  and  regulate  the  conduct  of  manufacturing  establish- 
ments within  the  States  simply  because  the  corporations  main- 
taining them  ship  their  goods  beyond  the  State. 

That  Congress  has  general  and  exclusive  control  over  inter- 
state commerce  has  never  been  denied  since  Gibbons  v.  Ogden 
C1)  was  decided.  That  the  power  to  regulate  interstate  com- 
merce 

"includes  as  well  commerce  carried  on  by  corporations 

as  commerce  carried  on  by  individuals," 
has  never  been  denied  since  Paul  v.  Virginia  (2)  was  decided. 
That  Congress  has  power  to  create  corporations  to  carry  out 
the  powers  expressly  conferred  has  never  been  denied  since 
McCulloch  v.  Maryland  (3)  was  decided.  That  Congress  has 
power  to  absolutely  forbid  interstate  commerce  in  some  in- 
stances has  never  been  denied  since  the  lottery  cases  (4)  and 
the  cattle  cases  (5)  were  decided. 
As  Chief  Justice  Marshall  says  (6)  : 

"The  power  over  commerce  with  foreign  nations  and 

among  the  several  States  is  vested  in  Congress  as  abse- 


nt Wheat.  240. 

(2)  8  Wall.  168. 

(3)  4  Wheat.  316. 

(4)  188  U.  S.  321. 

(5)  187  U.  S.  137. 

(6)  Gibbons  v.  Ogden,  9  Wheat.  240. 

51 


lately  as  it  would  be  in  a  single  government  having  in 
its  constitution  the  same  restrictions  in  the  exercise  of 
the  power  as  are  found  in  the  Constitution  of  the  United 

States." 

In  the  Sugar  Refining  case  (x)  the  Court  says: 

''On  the  other  hand,  the  power  of  Congress  to  regulate 
commerce  among  the  States  is  also  exclusive.  The  Con- 
stitution does  not  provide  that  interstate  commerce  shall 
be  free,  but  by  the  grant  of  this  exclusive  power  to  regu- 
late it,  it  was  left  free  except  as  Congress  might  impose 
restraint;"  and  where  "the  law  passed  by  a  State  in  the 
exercise  of  its  acknowledged  powers  comes  into  conflict 
with  that  will  (of  Congress),  the  Congress  and  the  State 
cannot  occupy  the  position  of  equal  and  opposing  sov- 
ereignties because  the  Constitution  declares  its  su- 
premacy and  that  of  the  laws  passed  in  pursuance  there- 
of; and  that  which  is  not  supreme  must  yield  to  that 
which  is  supreme." 

In  a  striking  opinion  by   one  of  the  judges  of  the   United 
States  Circuit  Court  (2)  this  language  was  used: 

"We  think  the  power  of  Congress  is  supreme  over  the 
whole  subject  (interstate  commerce)  unimpeded  and  un- 
embarrassed by  State  lines  or  State  laws ;  that  in  this 
matter  the  country  is  one,  and  the  work  to  be  accom- 
plished is  national ;  and  that  State  interests,  State  jeal- 
ousies  and    State   prejudices   do   not  require   to   be   con- 
sulted.    In  matters  of  foreign  and  interstate  commerce 
there  are  no  States." 
In  the  matter  of  corporate  powers  to  be  exercised  by  com- 
panies engaged  in  interstate  commerce  the  States  themselves 
have  recognized  the  superior  jurisdiction  of   Congress.     In  a 
New  York  case   (3)   the  question  turned  upon  the  right  of  the 
State  to  legislate  upon  the  consolidation  of  railroads  forming 
interstate  lines,  and  the  court  said: 

"The  conclusion,  therefore,  is  inevitable  that  in  the  ab- 
sence of  such  legislation  by  Congress  the  power  exists  in 
the  State  that  legislates  upon  the  subject." 


(1)  United  States  v.  E.  C.  Knight  Co.,  156  U.  S.  1. 

(2)  Stockton  v.  B.  &  O.  R.  R.  Co.,  32  Fed.  16. 

(3)  Bordman  v.  Lake  Shore  &  Mich.  So.  Ry.  Co.,  84  N.  Y.  157. 

52 


CONGRESS    HAS    ASSUMED    AND   EXERCISED  THE   POWER  TO 
CREATE    INTERSTATE  CORPORATIONS. 

It  appears  from  these  decisions  that  Congress  has  plenary 
power  over  interstate  commerce.  It  may  itself  create  the  cor- 
porations that  engage  in  such  commerce.  It  may  do  less  than 
this,  and  restrict  the  corporate  powers  of  those  created  by  the 
States.  Let  us  consider,  for  a  moment,  what  Congress  has 
actually  done  in  this  respect.  In  1829  it  incorporated  the  Wash- 
ington, Alexandria  and  Georgetown  Steam  Packet  Company ; 
in  1862  it  incorporated  the  Union  Pacific  Railway  Company; 
in  1864  the  Northern  Pacific;  in  1866  the  Atlantic  and  Pacific; 
in  1870  the  Washington  and  Boston  Steamship  Company;  in 
1871  the  Texas  and  Pacific  Railway  Company,  and  in  1890  it 
incorporated  the  North  River  Bridge  Company,  authorizing  the 
construction  of  a  bridge  to  New  York  City  across  the  Hudson 
River,  and  regulating  commerce  in  and  over  such  bridge  between 
the  States  of  New  York  and  New  Jersey.  (*)  These  are  a  few 
only  of  the  interstate  companies  incorporated  by  Congress. 
That  Congress  has  the  power  to  create  such  corporations  has 
been  asserted  in  iits  own  behalf,  and  by  its  own  committees.  In 
the  report  of  the  House  Committee  of  the  Fifty-ninth  Congress 
(2)  this  statement  is  made: 

"Corporations  are  created  by  the  sovereign,  whether 
the  sovereign  be  the  United  States  or  a  State.  In  this 
regard  the  power  of  Congress  is  limited  while  the  power 
of  the  State  is  unlimited.  Wrhenever,  under  the  Constitu- 
tion, Congress  can  exercise  a  power  Congress  can  create 
a  corporation  to  carry  that  power  into  execution!' 

CONGRESS   CAN   REGULATE   AND   SUPERVISE. 

Let  us  see  what  Congress  has  actually  done  in  restricting  or 
regulating  interstate  commerce  corporations  whose  charters 
have  been  granted  by  the  States.  The  Sherman  Anti-Trust  Act 
was  simply  an  exercise  of  this  power.  Congress  found  that 
corporations  chartered  by  the  States  to  engage  in  interstate 
commerce  were  destroying  the  freedom  of  that  commerce  by 
entering  into  combinations  in  restraint  of  it.  So,  if  Congress 
should  find  that  corporations  chartered  by  the  States  to  engage 
in  interstate  commerce  are  now  monopolizing  that  commerce 

C1)  Luxton  v.  North  River  Bridge  Co.,  153  U.  S.  525. 
(2)   Report  No.  2491. 

53 


by  purchasing  or  controlling  the  stocks  of  other  corporations 
also  engaged  in  that  commerce,  can  it  not  forbid  such  purchase 
and  control?  Does  it  make  any  difference  that  some  State  has 
expressly  authorized  the  forbidden  thing  to  be  done?  Would 
it  have  made  any  difference  if  some  State  had  expressly  author- 
ized the  combinations  that  were  outlawed  by  the  Sherman  act? 
The  establishment  of  the  National  Bureau  of  Corporations  and 
the  investigations  which  that  bureau  is  authorized  to  make  of 
all  corporations  engaged  in  interstate  commerce,  is  but  an- 
other instance  of  the  exercise  of  the  power  here  claimed.  The 
Interstate  Commerce  Act  itself,  and  particularly  the  recent 
adoption  by  the  commission  of  a  uniform  system  of  accounting 
for  all  interstate  railroad  corporations,  is  only  another  regula- 
tion of  the  same  character.  The  further  amendment  of  this  act 
by  which  interstate  railroads  are  forbidden  to  transport  pro- 
ducts of  their  own  mines  or  manufactories  and  are  practically 
required  to  dispose  of  their  coal  properties  by  May  I,  1908,  is 
merely  an  indirect  method  of  controlling  their  corporate 
powers.     (1). 

The  need  of  a  more  thorough  and  effective  Federal  super- 
vision over  corporations  engaged  in  interstate  commerce  is 
emphasized  by  thoughtful  men  on  every  side.  The  President  has 
repeatedly  voiced  this  necessity  in  words  which  reveal  a  patriot's 
vision  and  solicitude ;  and  the  Supreme  Court  of  the  United 
States  in  several  of  its  more  recent  decisions  has  prepared  the 
country  for  judicial  support  of  legislation  which  asserts  the 
fullest  control  of  the  Federal  Government  over  all  the  instru- 
mentalities of  Federal  commerce. 

In  the  Northern  Securities  case  (2)  that  court  discussed  the 
very  question  of  the  right  of  Congress  to  forbid  a  State  cor- 
poration engaged  in  interstate  commerce  to  own  the  stock  of 
another  such  corporation,  and  while  it  expressly  disclaimed  any 
intention  of  deciding  that  question,  the  language  it  used  is 
significant : 

"Congress  has,"  says  the  Court,  *  *  *  "a  large 
discretion  as  to  the  means  to  be  employed  in  the  exercise 
of  any  power  granted  to  it.  For  the  present  it  is  de- 
termined to  go  no  further  than  to  protect  the  freedom  of 
commerce  among  the  States  and  with  foreign  States  by 


(!)  Fed.  Stat.  Supp.  1907,  p.  170. 
(2)  193  U.  S.  197. 


54 


declaring  illegal  all  contracts     *     *     *     in  restriction  of 
such  commerce.     *     *     *     How  much  further  it  may  go 
we  do  not  say/' 
In  a  still  later  case,  decided  in  October,  1905   (M,  the  Court 
had   under  consideration  the  conduct  of  an   industrial   corpora- 
tion engaged  in  interstate  commerce  and  in  defining  the  powers 
of  Congress  with  respect  to  such  corporation,  Mr.  Justice  Brown 
uses  these  plain  words : 

"It  is  true  that  the  corporation  in  this  case  was  char- 
tered under  the  laws  of  New  Jersey,  and  that  it  receives 
its  franchise  from  the  Legislature  of  that  State ;  but  such 
franchises,  so  far  as  they  involve  questions  of  interstate 
commerce,  must  also  be  exercised  in  subordination  to 
the  power  of  Congress  to  regulate  such  commerce. 
*  *  *  Being  subject  to  this  dual  sovereignty,  the 
general  Government  possesses  the  same  right  to  see  that 
its  own  laws  are  respected  as  the  State  would  have  with 
respect  to  the  special  franchises  vested  in  it  by  the  laws 
of  the  State.  The  powers  of  the  general  Government  in 
this  particular  *  *  *  are  the  same  as  if  the  corpora- 
tion had  been  created  by  an  act  of  Congress.'' 

PRACTICAL   ADVANTAGES  THAT  WOULD  FOLLOW  THE  DENIAL 
TO  INTERSTATE  CORPORATIONS  OF  THE  RIGHT  TO  OWN 
STOCK  IN  OTHER  CORPORATIONS. 

There  would  be  nothing  startling  or  revolutionary  in  the  act, 
if  Congress  should  pass  a  general  law  forbidding  all  corpora- 
tions engaged  in  interstate  commerce  to  own,  or  to  be  con- 
trolled by,  other  corporations  so  engaged.  It  would  be  simply 
an  adoption  of  the  common  law.  It  would  be  merely  an  exten- 
sion of  the  policy  already  enforced  by  Congress  with  respect  to 
all  corporations  now  created  under  its  direct  authority.  National 
banks  have  no  power  to  buy  the  stocks  of  other  national  banks, 
and  corporations  chartered  by  the  District  of  Columbia  are 
expressly  forbidden  to  own  the  stocks  of  other  corporations. 

The  practical  advantage  of  the  step  proposed  would  seem 
to  appeal  with  special  force  to  all  law  officers  whose  public 
duties  have  brought  experience  in  enforcing  existing  statutes 
against  the  more  harmful  combinations  of  capital.  If  corpora- 
tions engaged  in  interstate  commerce  are  hereafter  forbidden  to 


(1)  Hale  v.  Henkel,  201  U.  S.  43. 

55 


deal  in  corporate  stocks  the  combinations  thus  formed  can  be 
dissolved  by  a  very  simple  method.  A  disobedience  of  the  new 
taw  by  any  corporation  can  be  made  the  basis  of  an  action  by 
the  Government  to  oust  the  offending  company  from  the  right 
further  to  do  an  interstate  commerce  business,  or  such  other 
penalties  can  be  imposed  as  the  nature  of  the  case  demands. 
As  to  existing  investments  of  this  character,  the  same  consid- 
eration can  be  given  the  interests  involved  as  was  accorded  the 
railroads  in  the  disposition  of  their  coal  properties. 

In  pursuance  of  the  plan  here  suggested,  no  charter  need  be 
granted  by  the  National  Government,  and  not  even  any  license 
to  interstate  corporations  would  be  required,  although  this 
would  not  be  out  of  harmony  with  the  proposed  restriction  upon 
the  powers  of  such  corporations.  The  law  itself  would  simply 
forbid  stock  ownership  among  interstate  corporations,  and  its 
violation  would  result  in  a  proceeding  by  the  Federal  Depart- 
ment o-f  Justice,  similar  to  the  quo  warranto  actions  now 
authorized  in  the  States,  to  forfeit  the  interstate  rights  of  the 
corporation  thus  exceeding  its  powers.  It  would  not  be  neces- 
sary in  such  proceeding,  as  it  appears  to  be  now  under  the 
Sherman  act,  to  show  that  a  monopoly  is  produced  by  such 
stock  ownership,  or  that  the  purpose  of  that  form  of  combina- 
tion was  to  produce  a  monopoly.  The  mere  fact  of  the  acquisi- 
tion by  one  interstate  corporation  of  the  stock  of  another,  with 
the  continued  maintenance  of  the  corporations  thus  controlled, 
would  itself  be  deemed  an  interference  with  the  freedom  of  inter- 
state commerce. 

This  plan  would  not  invade  the  appropriate  sphere  of  the 
States ;  they  would  be  left  free  to  create  all  corporations,  both 
for  domestic  and  interstate  business,  and  to  endow  them  with 
any  corporate  powers  thev  chose,  except  that  as  to  interstate 
companies  the  charter  of  the  State  would  be  held  subject  to 
thesuperior  law  of  Congress.  And  if  for  a  violation  of  that  law 
an  interstate  corporation  were  ousted  of  its  right  to  do  an  inter- 
state business  it  could  still  continue  to  do  a  domestic  business 
m  the  State  of  its  creation  or  in  anv  other  State  which  was  will- 
ing to  admit  it  for  that  purpose  and  submit  to  the  business 
conditions  which  result.  But  the  States  whose  laws  forbid  stock 
ownership  by  corporations  would  be  protected  and  interstate 
commerce  would  be  free  from  the  most  impregnable  combina- 
tion which  now  controls  it. 

I  make  no  prediction  that  the  policy  here  suggested  would 

56 


bring  the  millennium,  or  would  solve  the  "problem  of  the  trusts." 
But  it  might  remove  the  most  obvious  of  existing  evils  ;  and 
more  important  than  all  else,  it  would  make  the  promoters  of 
every  great  enterprise  conduct  it  openly  under  one  name.  The 
battle  for  business  would  then  go  on  without  the  use  of  "con- 
cealed weapons,"  and  the  natural  growth  of  corporations  would 
not  need  to  be  retarded  by  a  resort  to  governmental  restric- 
tions which  oppose  sound,  economic  laws. 

Surely  no  business  man  and  no  corporation  in  this  country 
can  fairly  complain  if  the  only  limitation  put  upon  the  amouni 
of  property  that  may  be  acquired,  or  of  wealth  that  may  be 
amassed,  or  of  trade  that  may  be  secured,  is  that  every  corpora- 
tion shall  devote  itself  solely  to  the  management  of  its  own 
affairs. 

THE  CHAIRMAN :  As  the  second  speaker  of  the  morning, 
I  have  the  honor  to  present  Mr.  William  P.  Borland,  of  Kansas 
City,  Missouri,  who  will  speak  on  "State  and  Federal  Jurisdic- 
tion Over  Interstate  Commerce." 

Mr.  William  P.  Borland. 

Mr.  Chairman — If  this  conference  is  to  do  any  good  it  will  be 
because  it  offers  some  practical  solution  of  vexed  problems.  We 
are  met  here  to  discuss  live  issues.  What  do  the  American  people 
expect  of  us?  To  propose  remedies.  Let  me  tell  you  in  a  few 
moments  of  one  of  these  problems  and  its  possible  remedy — the 
problem  of  how  to  enforce  State  statutes,  how  to  check  the  en- 
croachment of  the  Federal  courts,  and  how  to  maintain  the  con- 
fidence of  the  people  in  the  administration  of  the  law,  a  subject 
upon  which,  at  the  request  of  Governor  Folk,  of  Missouri,  I  had 
the  honor  to  prepare  for  him  some  written  opinions  during  the 
heat  and  hurry  of  the  general  and  special  sessions  of  our  legis- 
lature. 

DEMAND  FOR  LAW  ENFORCEMENT. 

We  will  all  agree  that  at  no  time  in  the  history  of  our 
country,  or  perhaps  in  the  history  of  any  other  country,  has  there 
been  such  a  widespread  and  earnest  desire  for  law  enforcement 
as  there  is  to-day  in  America.  There  has  hardly  been  a  time  in 
our  history — bright  though  it  is  with  every  movement  toward 
freedom,  peace  and  prosperity — when  we  have  not  been  compelled 
to  tolerate  lawlessness  in  some  quarters,  among  some  element  of 

57 


V 


the  people,  or  in  some  sections  of  the  country.  At  first  these 
conditions  were  supposed  to  grow  out  of  the  demoralization  and 
disorder  brought  on  by  the  two  wars  with  England;  then  came 
the  conquest  and  settlement  of  the  Southwest,  with  its  new  prob- 
lems of  lawlessness,  and  the  great  domain  thrown  open  after  the 
Mexican  War  was  barely  seized  and  held  by  our  citizens  with  its 
accompaniment  of  Indian  wars  and  Mormon  troubles,  when  the 
fury  of  the  great  sectional  strife  of  1861  burst  upon  us,  and 
again  the  love  of  peace  and  order  of  the  American  people  was 
strained  almost  to  the  breaking  point.  The  boiling  cauldron  of 
Civil  War  threw  up  the  vilest  scum  of  lawless  elements  that 
harried  the  South  and  the  border  States  for  another  generation. 
Meantime,  the  rapid  growth  and  development  of  the  great  West 
brought  into  existence  the  mining  camps  and  the  cattle  camps, 
which  were  magnets  to  attract  and  concentrate  desperadoes  and 
renegades  from  every  quarter  of  the  civilized  world.  Nor  was 
the  East  without  its  share  of  blame.  A  large  element,  masking 
under  the  name  of  investors  and  promoters  and  generally  cloth- 
ing themselves  with  the  sacred  disguise  of  public  benefactors, 
engaged  in  deliberate  schemes  of  plundering  the  resources  of  the 
V\  est  by  peaceful  means  and  under  the  guise  of  law.  Political 
jobbery,  lobbying,  bribery,  corruption  of  legislatures,  purchased 
seats  in  Congress  and  in  the  Senate,  railroad  land  grabs,  bond 
steals,  franchise  juggling,  bankruptcy,  repudiation  and  fake  re- 
ceiverships are  some  of  the  noxious  flowers  that  bloomed  above 
the  stagnant  pool  of  crime  and  corruption. 

A  few  days  before  I  came  to  this  conference,  a  little  township 
in  the  county  where  I  live  had  a  celebration  to  burn  and  destroy 
$67,500  of  railroad  bonds  issued  in  187 1  for  a  railroad  which  was 
never  built,  and  never  even  graded,  but  which  bonds  were  trans- 
ferred to  an  alleged  innocent  holder  and  held  to  be  valid  by  the 
United  States  Court.  Through  all  the  dismal  years  of  the  re- 
construction when  the  people  of  that  section  were  rebuilding 
their  burned  farm  houses  and  replanting  their  desolated  fields, 
through  all  the  severe  financial  distress  following  the  panic  of  '73, 
through  the  grasshopper  invasion  and  crop  failures  from  '75  to 
1880,  and  through  the  last  great  panic  in  '93  those  people  have 
continually  struggled  against  this  enormous  burden,  which  was  a 
blanket  mortgage  from  every  farm  in  the  township.  At  last  they 
have  paid  off  every  dollar,  and  you  may  well  imagine  the  stern 
joy  that  entered  into  their  hearts  when  the  bonds  went  up  in 
flames. 

58 


In  New  York  State  the  recent  traction  investigation  and  the 
insurance  scandals  of  a  year  ago  have  startled  the  people  with 
their  disclosures  of  widespread,  deliberate  and  organized  law- 
lessness. Those  financiers  seem  to  have  adopted  the  cynical  doc- 
trine of  Balzac:  "The  rich  are  beyond  the  jurisdiction  of  law 
and  of  public  opinion.  The  last  argument  to  the  world  is  success. 
Success  is  virtue."  Free  government  has  been  on  trial.  No  won- 
der the  demand  for  the  referendum  is  growing  when  bribery  is 
regarded  as  a  conventional  crime ! 

We  stand  now  at  an  era  of  universal  law  enforcement.  Every 
citizen  of  the  United  States,  in  every  quarter  of  the  United  States, 
of  every  rank  from  top  to  bottom,  is  thoroughly  devoted  to  the 
Union,  and  thoroughly  in  favor  of  the  enforcement  of  just  and 
equal  laws ;  and  with  some  pride  we  say  that  this  great  move- 
ment toward  law  enforcement  originated  in  the  great  State  of 
Missouri,  and  has  spread  from  thence  both  east  and  west. 

All  of  the  great  questions  which  your  managing  committee  has 
designated  as  subjects  for  this  conference  are  bound  together  with 
one  common  tie.  That  tie  is  the  demand  for  an  equality  of  privilege 
for  all  citizens  and  in  all  sections.  Special  privileges  to  none  is 
the  very  essence  of  a  republic,  and  no  laws  are  wise  or  wholesome 
whose  necessary  tendency  is  to  produce  class  distinction  or  special 
privileges.  Government  has  no  right  to  force  any  man  up,  nor 
force  any  man  down.  Aristocracy  and  anarchy  have  always  gone 
hand  in  hand.  There  never  has  been  a  time  in  history  when  we 
have  not  had  examples  of  this,  nor  are  the  object-lessons  wanting 
in  the  present  conditions  of  European  countries.  We  lay  it  down 
as  an  axiom  that  there  is  no  anarchy  without  aristocracy. 

CONFLICT  OF  STATE   AND   FEDERAL  COURTS. 

The  conflicting  jurisdiction  of  the  State  and  Federal  courts, 
the  protective  tariff,  the  anti-trust  laws,  the  regulation  of  inter- 
state commerce  and  the  control  of  public  utilities  in  large  cities 
are  all  phases  of  the  same  great  question.  Let  us  look  at  the 
signs  of  the  times.  Ten  years  ago  any  criticism  of  the  Federal 
courts  was  received  by  the  average  citizen,  either  East  or  West, 
with  the  greatest  disgust  and  indignation.  To-day  a  concerted 
movement  of  various  interests,  political  and  commercial,  is  on 
foot  to  curtail,  or  at  least  to  limit  and  define,  the  jurisdiction  of 
those  courts.  Especially  is  this  true  among  the  State  officials 
who  represent  very  closely  the  prevailing  sentiment  of  their 
States.    Why  this  change?    Are  the  Federal  courts  worse  to-day 

59 


than  ten  years  ago  ?  Are  the  men  who  sit  in  them  less  capable  or 
less  honest?  No!  If  anything,  there  has  been  an  improvement 
in  the  personnel  of  those  courts.  The  change  of  feeling,  then, 
comes  from  some  other  source.  It  is  the  awakening  sense  of  the 
people  that  the  tendency  of  the  subordinate  Federal  courts  is 
gradually  to  encroach  upon  the  rights  of  the  States  and  the  busi- 
ness interests  of  the  country.  The  Federal  courts  stand  as  the 
embodiment  of  centralization.  There  must  be  a  limit  beyond 
which  centralization  is  neither  justifiable  nor  safe.  The  Amer- 
ican people  will  never  surrender  the  great  principle  of  local  self- 
government.  It  is  an  unformed  sense  of  this  that  fills  the  mind 
of  the  average  citizen  who  unthinkingly  casts  aspersions  upon 
those  courts.  This  was  seen  many  years  ago  by  some  of  the 
clearest  thinkers.  In  1884  old  Governor  Curtin,  of  Pennsylvania, 
a  stalwart  Republican,  in  opposing  in  Congress  the  bill  to  renew 
the  land  grant  to  the  Texas  Pacific  Railroad,  said : 

"I  cannot  but  think  it  will  be  better  for  this  country  to  be  in  the 
hands  of  small  land  owners,  especially  when,  as  at  present,  power 
is  so  centralized  in  this  Federal  city,  and  when  the  jurisdiction  of 
the  courts  of  the  national  government  has  been  so  extended  that 
the  people  scarcely  find  a  settlement  of  their  rights  of  property  and 
person  in  the  State  courts.  Why,  sir,  I  can  remember  when  the 
American  citizen  no  more  felt  the  power  of  the  Federal  courts 
than  the  air  he  breathed.  When  money  is  centralized  in  the  hands 
of  a  few,  when  a  few  men  dominate  and  control  the  business  of 
a  country,  I  tremble,  sir,  for  its  liberties,  and  wonder  if  monopo- 
lists should  be  allowed  to  shape  its  future.  The  authorized  per- 
mit of  the  government  by  statute,  and  the  arbitrary  assumption  if 
enlarged,  will,  in  time,  absorb  the  States  and  their  sovereignty, 
and  the  pernicious  anti-republican  and  despotic  espionage  under 
which  internal  revenue  is  collected  may  be  extended  to  all  de- 
partments of  the  government." 

INCREASE   OF   CORPORATION   BUSINESS    IN   FEDERAL   COURTS. 

In  Missouri,  as  in  many  other  States,  we  are  wrestling  with 
the  problem  of  enforcing  the  State  laws.  The  immediate  cause 
of  the  difficulty  is  that  the  local  Federal  courts  enjoin  at  the  in- 
stance of  some  railroad  company,  and  practically  without  a  hear- 
ing, the  enforcement  of  State  statutes  regularly  passed.  It  is  a 
well-known  fact  that  the  Federal  courts  have  become  almost 
solely  the  forum  for  corporation  cases.  More  than  nine-tenths 
of  the  business  of  those  courts  is  in  behalf  of  corporations — al- 

60 


most  all  of  them  railroad  corporations — and  all  of  them,  with 
scarcely  an  exception,  using  that  forum  to  the  exclusion  of  the 
State  courts  on  the  ground  that  they  are  foreign  corporations,  and 
not  citizens  of  the  State  where  they  do  business.  Is  this  well? 
Does  it  add  to  the  dignity  or  usefulness  of  the  Federal  courts? 
Were  they  created  for  this?  I  have  no  hesitation  in  saying  that 
it  is  a  misfortune  to  the  Federal  courts  themselves,  a  misfortune 
to  the  country,  a  lasting  injury  to  the  State.  It  is  a  direct  in- 
road upon  the  great  principle  of  equality  in  establishing  one  of 
the  most  pernicious  examples  of  class  legislation.  In  plain  Eng- 
lish, we  have  virtually  erected  a  special  court  for  the  use  of  for- 
eign corporations,  a  species  of  class  legislation  in  favor  of  such 
corporations  the  most  glaring  and  indefensible.  Like  all  abuses, 
this  has  been  of  gradual  growth.  It  is  almost  entirely  due  to  the 
railroads.  The  Supreme  Court  of  the  United  States  during  the 
splendid  period  of  Judge  Marshall  did  not  hold  that  a  corpora- 
tion was  a  citizen  of  the  State  which  created  it,  within  the  mean- 
ing of  the  Constitution.  It  held  that  a  foreign  corporation  could 
only  sue  in  the  Federal  court  by  virtue  of  the  citizenship  of  its 
stockholders.  After  1840,  when  the  railroads  began  their  mar- 
velous growth,  the  court  finally  crystallized  the  rule  that  all  of 
the  stockholders  of  a  corporation  must  be  conclusively  presumed 
to  be  citizens  of  the  State  which  chartered  it;  that  a  corporation 
was  a  citizen  of  the  State  in  which  it  was  incorporated,  and,  for 
that  reason,  could  sue  in  the  United  States  court  under  the  clause 
of  the  Constitution  extending  the  judicial  power  to  controversies 
between  citizens  of  different  States.  This  is  an  anomaly  in  con- 
stitutional law,  as  every  lawyer  well  knows.  A  corporation  is 
not  really  a  citizen  in  any  sense.  It  is  a  mere  legal  fiction.  It  is 
not  a  citizen  within  the  clause  of  the  Constitution,  which  pro- 
vides that  the  citizens  of  each  State  shall  be  entitled  to  all  the  priv- 
ileges and  immunities  of  the  citizens  of  the  several  States.  The 
effect  of  holding  it  to  be  a  citizen  within  the  meaning  of  the 
judicial  clause  has  been  to  enable  any  State  in  the  Union  to  spawn 
corporations  and  cast  them  out  to  sue  in  the  United  States  courts 
and  defy  the  laws  of  the  other  States.  This  practice  has  finally 
become  so  flagrant  that  every  little  street  corner  lunch  counter 
rushes  off  and  gets  incorporated  under  the  laws  of  another  State 
whenever  it  desires  to  bring  suit  in  the  Federal  courts,  and  the 
time  of  the  Federal  courts  is  almost  exclusively  taken  up  with 
the  business  of  alleged  foreign  corporations.  It  will  readily  be 
seen  that  this  destroys  the  equality  of  privilege  between  citizens, 

61 


creates  class  distinctions,  and  generally  demoralizes  the  proper 
poise  of  our  dual  system  of  government.  But  it  may  be  said 
that  each  State  may  protect  itself  from  foreign  corporations,  may 
impose  such  restrictions  upon  them  as  it  sees  fit,  or  may  totally 
exclude  them  from  its  borders.  This  is  true,  except  as  to  such  as 
are  engaged  in  interstate  commerce.  But  total  exclusion  of  for- 
eign capital  from  a  State  is  too  drastic  a  remedy,  and  one  which 
no  State  should  be  driven  to  adopt.  Would  it  not  be  better  for 
all  concerned  that  the  foreign  corporation  be  compelled  to  sub- 
mit to  the  local  courts  of  the  State?  This  might  clarify  the  at- 
mosphere of  the  Federal  courts,  lend  dignity  and  strength  to  the 
State  courts,  and,  more  than  all,  remove  a  feeling  of  distrust, 
prejudice  and  jealousy  from  the  minds  of  the  people.  In  Mis- 
souri we  have  several  railroads  which  are  Missouri  corporations. 
We  have  several  others  which  are  foreign  corporations.  The 
foreign  corporations  have  a  right  to  resort  to  the  United  States 
court.  The  domestic  corporations  have  no  such  right.  It  is  also 
within  the  power  of  any  body  of  citizens  of  Missouri  to  get 
themselves  incorporated  under  the  laws  of  New  Jersey  to  trans- 
act business  wholly  in  Missouri,  and  by  this  solemn  farce  to 
enroll  themselves  among  the  privileged  class  of  "foreign  corpo- 
rations." 

SOME  MISSOURI  EXPERIENCE. 

Last  winter  the  Missouri  Legislature  had  under  consideration  a 
bill  to  require  all  railroad  companies  doing  a  local  business  in  the 
State  to  incorporate  under  the  laws  of  Missouri.  A  statute  sim- 
ilar to  this  is  in  force  in  the  State  of  Texas.  The  bill  passed  the 
lower  branch  of  the  Missouri  Legislature  by  a  large  majority, 
and  was  before  the  Senate.  The  railroads  then  put  up  a  very 
strong  opposition  to  the  bill  on  the  ground  that  it  would  greatly 
inconvenience  them  in  readjusting  their  securities,  and  they 
begged  the  Senate  to  pass  instead  a  bill  providing  that  any  rail- 
road which  removed  a  case  from  a  State  court  to  the  Federal 
Court  should  have  its  license  to  do  local  business  in  the  State 
revoked,  leaving  its  right  to  do  interstate  business  unaffected. 
This  latter  bill  was  modeled  upon  a  Kentucky  statute  in  regard 
to  insurance  companies,  which  was  sustained  by  the  Supreme 
Court  of  the  United  States  in  the  Prewitt  case.  Such  a  law 
was  accordingly  passed,  and  it  was  no  sooner  on  the  statute 
books  than  three  of  the  foreign  railroad  companies,  the  Chicago, 
Milwaukee  &  St.  Paul,  the  Chicago,  Rock  Island  &  Pacific,  ana! 

62 


the  Atchison,  Topeka  &  Santa  Fe,  rushed  t'o  the  Federal  Court 
and  enjoined  its  enforcement.  Their  objections  to  the  law  are 
mainly  two:  One,  that  it  constitutes  class  legislation  because  it 
does  not  forbid  a  non-resident  citizen  from  removing  a  case  to 
the  Federal  Court,  but  does  discriminate  against  a  corporation. 
This  objection  is  not  tenable  under  the  constitution,'  as  a  for- 
eign corporation  cannot  enter  into  local  business  in  the  State 
except  upon  such  terms  as  the  State  dictates.  The  second 
objection  is  that  it  interferes  with  interstate  commerce.  In 
other  words,  that  because  a  corporation  is  engaged  in  interstate 
commerce,  it  has  a  right  to  do  local  business  also,  with  or  with- 
out the  permission  of  the  State.  It  is  probable  under  the  pres- 
ent condition  of  the  law  that  when  the  case  reaches  the  Supreme 
Court  of  the  United  States,  both  of  these  points  will  be  decided 
against  the  railroad  companies,  and  the  statutes  will  be  sus- 
tained. But  meanwhile,  by  virtue  of  an  injunction  by  an  inferior 
Federal  Court,  the  railroad  company  is  enabled  to  defy  all  power 
of  the  State  to  regulate  foreign  corporations,  and  will  be  enjoy- 
ing several  years'  profits  from  its  unlawful  business,  for  which 
no  possible  redress  can  be  had;  in  other  words,  it  is  always  a 
good  speculation  for  a  law-breaker  to  get  somebody  enjoined 
from  enforcing  the  law  against  him. 

SHOULD  FEDERAL  COURTS   DEFEAT   LOCAL  STATE   POLICY? 

Missouri  is  also  engaged  in  a  struggle  to  enforce  its  laws 
regulating  the  rates  to  be  charged  by  railroad  companies.  The 
Supreme  Court  of  the  United  States  has  decided  that  the  Fed- 
eral Government  cannot  regulate  rates  on  business  wholly  within 
a  State,  yet,  when  the  State  undertakes  to  do  so,  the  foreign 
corporation  immediately  enjoins  the  enforcement  of  its  law  on 
the  ground  that  the  local  rates  are  so  mingled  with  the  through 
rates  that  it  is  impossible  for  the  State  to  fix  a  fair  and  reason- 
able local  rate  without  confiscating  the  property  of  the  railroad. 
In  this  case  also  the  railroads  are  clear  gainers  by  any  delay. 
As  this  is  a  government  by  the  people,  and  by  an  enlightened 
people  at  that,  it  is  impossible  that  the  settled  purpose  of  the 
people  can  be  defeated  in  the  end.  Certainly  it  cannot  be 
defeated  by  the  interposition  of  the  Federal  Courts,  as  they 
emanate,  though  indirectly,  from  the  people.  We  are  all  familiar 
with  the  picture  of  the  Indian  who  tried  to  lasso  the  locomotive. 
The  enterprise  had  very  little  effect  on  the  locomotive,  but  was 

63 


highly  disastrous  to*  the  Indian.    The  corporations  will  be  regu- 
lated, and  reasonable  rates  will  be  established. 

It  may  be  asked  then,  what  harm  will  be  done  beyond  a 
little  delay,  which  may  give  occasion  for  more  moderate  and 
deliberate  action?  The  answer  to  this  is  plain.  It  is  a  talse 
principle,  wrong  in  theory  and  vicious  in  practice.  It  falsely 
assumes  that  the  Legislature  of  a  State,  aided  by  the  courts  of 
the  State,  is  engaged  in  pillage;  that  the  State  can  be  trusted 
with  the  lives  and  fortunes  of  its  own  citizens,  but  is  presumed 
to  be  in  the  wrong  when  a  foreign  corporation  is  involved ;  that 
its  arm  must  be  paralyzed  by  an  outside  force. 

Another  answer  is  that  it  makes  the  Federal  Courts  the  cen- 
sors of  State  action  in  a  way  that  the  Constitution  never  in- 
tended, and  not  with  happiest  results  to  the  courts,  or  the  State 
or  the  public  opinion  of  the  community. 

But  above  and  beyond  all  this,  it  destroys  the  confidence  of 
the  people  in  the  equal  administration  of  the  law,  by  leading 
them  to  think  that  laws  are  meshes  to  entangle  the  mice,  while 
the  lions  break  through.  Every  lawyer  and  every  thinking  man 
regrets  profoundly  the  prevailing  sentiment  in  regard  to  the 
Federal  Courts.  We  cannot  expect  the  correction  of  this  mat- 
ter to  come  from  the  railroads,  as  the  railroads  unfortunately 
have  been  run  for  many  years  upon  the  principle  that  every- 
thing possible  must  be  gouged  out  of  the  public  while  the 
opportunity  lasts.  Every  railroad  manager  seems  to  adopt  as 
his  motto :  ''After  me  the  deluge,"  and  nowhere  in  railroad 
circles  have  we  found  any  sentiment  looking  to  a  just  solution 
of  the  railroad  problems  for  the  future.  Temporize,  dodge  and 
fight  is  their  policy.  It  remains  for  such  conferences  as  this  to 
look  at  the  matter  squarely  in  the  face,  and  try  to  arrive  at  a 
just  solution  which  will  preserve  the  integrity  of  the  Federal 
Courts,  keep  them  in  full  operation  of  their  beneficent  jurisdic- 
tion, and  preserve  them  from  becoming  exclusively  the  forum 
of  special  interest  and  drawing  upon  themselves  the  disgust 
and  indignation  of  the  general  public.  A  moderate  reform  at 
this  time  may  prevent  the  pendulum  swinging  too  far. 

Some  writers  have  thought  that  this  matter  could  be  cor- 
rected by  a  more  liberal  construction  of  the  XI  Amendment, 
which  provides  that  the  judicial  power  of  the  United  States  shall 
not  extend  to  controversies  against  a  State  brought  by  a  citizen 
or  subject  of  a  foreign  State.  Perhaps  the  XI  Amendment  has 
not  been  given  broad  enough  scope,  but  at  any  rate,  the  Fed- 

64 


eral  Courts  have  decided  in  many  cases  that  where  State  officers 
are  threatening  to  destroy  property  rights  of  a  foreign  corpora- 
tion under  the  pretended  authority  of  an  unconstitutional  State 
statute,  the  Federal  Courts  would  enjoin  them  from  so  doing, 
and  such  a  proceeding  was  not  a  suit  against  the  State.  In  the 
rate  cases,  therefore,  under  the  present  decisions,  a  State 
statute  may  be  enjoined  in  the  Federal  Court  by  a  writ  issued 
against  the  officers  charged  with  its  enforcement.  But  the  XI 
Amendment  probably  forbids  a  similar  injunction  under  the 
anti-removal  statutes.  The  anti-removal  statute  does  not  pro- 
fess to  attack  any  rights  of  property  that  the  foreign  corpora- 
tion may  have  within  the  State,  but  only  attempts  to  do  what 
the  State  has  an  undisputed  right  to  do ;  that  is,  forbid  the 
further  transaction  of  business  within  its  limits  by  a  foreign 
corporation. 

REMOVE  CONSTITUTIONAL  QUESTIONS  FROM  LOWER  FEDERAL 

COURTS. 

The  true  solution  of  this  question  is  found  in  the  suggestion 
of  the  Attorney  Generals  who  recently  met  in  St.  Louis:  That 
Congress  should,  by  proper  enactment,  take  away  from  the  in- 
ferior Federal  Courts  the  jurisdiction  in  this  class  of  cases.  The 
effect  of  this  would  be  to  enable  the  foreign  corporation  when 
its  rights  were  attacked,  to  litigate  fully  the  question  in  the 
State  Court,  and  afterwards  take  the  same  from  the  highest 
court  of  the  State  to  the  Supreme  Court  of  the  United  States 
upon  any  constitutional  question  involved.  Congress  has  an 
undoubted  right  to  limit  the  jurisdiction  of  the  inferior  Federal 
Courts.  It  need  not  confide  to  those  courts  all  of  the  jurisdic- 
tion which  the  Constitution  vests  in  the  Federal  Government. 
It  can,  for  motives  of  convenience  and  public  policy,  leave  a 
portion  of  that  jurisdiction  unexercised.  Such  an  act  of  Con- 
gress could  never  weaken  the  Federal  Government.  No  man 
honestly  believes  that  it  would.  All  danger  from  States'  lights 
has  passed  away  forever.  The  real  danger  now  is  that  the 
constant  growth  of  Federal  power  may  take  away  all  local  pride, 
all  local  responsibility.  Centralization  is  often  mistaken  for 
strength  and  for  patriotism,  but  it  is  neither.  It  is  one  of  the 
constant  foes  of  free  government.  Never  should  we  become 
so  dazzled  by  the  sun  of  centralization  as  to  blot  the  stars  out 
of  our  national  flag.  This  is  still  an  "Indissoluble  Union  of 
Indestructible  States."    Let's  get  back"  to  the  Constitution. 

6$ 


THE  CHAIRMAN  :    Gentlemen,  the  last  speaker  of  the  morn- 
ing session  will  be  Mr.  A.   T.  Ankeny,  of  Minneapolis,  Minn., 
on  the   subject,  "Does  the  Power  to  Regulate  Rates  in  Trans- 
portation of  Commerce  Rest  with  Congress  or  the  State?" 
Mr.  A.  T.  Ankeny. 

Mr.  Chairman  and  Gentlemen — If  you  can  hold  out  a  few 
moments  for  your  dinner  I  will  promise  to  be  very  brief.  The 
usual  rule  for  a  lawyer  is  to  write  ten  or  fifteen  minutes  of  ma- 
terial and  then  get  before  the  audience  and  use  an  hour  for  talk- 
ing. I  will  not  do  that.  I  will  read  absolutely  what  I  have  writ- 
cen,  for  the  reason  that  when  I  undertake  to  digress  at  all  I 
simply  use  up  your  time  and  postpone  your  dinner. 

The  question  which  the  honored  president  stated  is  not  ex- 
actly in  the  proper  language,  because  nobody  doubts  the  power 
of  Congress  to  regulate  commerce  as  a  general  rule  among  the 
States.  The  question  which  I  insist  upon  is  a  new  question — 
absolutely  new  to-day  before  the  people  of  this  country.  Briefly 
stated,  it  is :  Does  the  power  to  regulate  rates  in  the  transpor- 
tation of  commerce  rest  wholly  with  Congress,  or  does  any  part 
of  that  power  rest  with  the  legislative  bodies  of  the  several 
States  ? 

The  question  is  to  be  determined  under  the  clause  of  the  Con- 
stitution which  reads  as  follows : 

"The  Congress  shall  have  power  *  *  *  to  regulate 
commerce  with  foreign  nations,  and  among  the  several 
States,  and  with  the  Indian  tribes." 

While  this  question  is  more  than  sufficiently  large  for  the  limits 
of  an  ordinary  paper,  it  is  believed  that  by  a  brief  but  compre- 
hensive statement  of  the  salient  features  and  the  principles  which 
underlie  we  may  be  enabled  to  reach  a  fairly  satisfactory  con- 
clusion. 

It  is,  first  of  all,  proper  to  observe  that  this  is  a  purely  legal 
question,  and  in  no  sense  political.  Preconceived  opinions,  there- 
fore— political  bias,  local  surroundings,  and  even  public  clamor — 
should  all  be  put  aside  in  the  discussion.  Its  ultimate  determina- 
tion can  rest  only  with  the  Supreme  Court  of  the  United  States. 
While,  therefore,  the  matter  is  pending,  the  National  Civic  Fed- 
eration, whose  purpose,  in  any  case,  is  to  ascertain  the  possible 
truth,  may  well,  at  this  time,  give  to  the  subject  a  fair,  calm  and 
impartial  consideration.  Even  though  no  better  results  shall  be 
obtained,  such  consideration  may  tend  in  some  degree  to  allay 

66 


any  disappointment  when  that  determination  by  the  eourt  shall 
have  been  reached. 

ORIGIN  OF  RATE  CASES. 

In  the  so-called  rate  cases  we  singularly  find  a  complete  re- 
versal of  former  business  policies,  especially  in  the  railways.  For 
long  years  in  control,  the  State  was  everything  to  them  and 
Congress  nothing.  The  chief  disputes  arose  at  home,  and  no  ef- 
forts were  spared  to  adjust  them  with  as  little  friction  as  pos- 
sible. To  this  end  the  lobby  of  the  railway  was  a  conspicuous 
though  silent  part  of  the  legislative  body.  The  companies  were 
often  in  politics  as  well  as  in  transportation.  They  could  gen- 
erally be  depended  on  in  a  political  campaign  for  a  contribution 
on  one  side  or  the  other,  and  sometimes  on  both.  Free  passes 
carried  the  legislator  of  influence  everywhere,  and  it  was  rare 
thing  for  even  judges  on  the  bench  to  refuse  them.  The  whole 
object  seemed  to  be  to  keep  things  in  statu  quo.  By  degrees  the 
changes  came.  The  people  rebelled  against  excessive  charges, 
rebates  and  discriminations,  as  these  appeared  from  time  to  time. 
To  meet  this  uprising  no  political  convention  longer  dared  to  go 
before  the  people  without  a  pledge  for  relief.  No  matter  how. 
thoroughly  divided  on  other  issues,  here  was  a  common  ground, 
and  all,  without  any  distinction,  united  in  one  great  battle  to  break 
down  and  crush  out  the  evils.  What  the  powers  at  Washington 
were  apparently  unable  or  unwilling  to  do,  the  State  legislatures 
commenced  to  do,  and,  beginning  with  Ohio,  twenty-one  States 
undertook  to  settle  the  difficulties  by  plunging  headlong  into 
greater  ones.  They  attempted  by  legislation  to  fix  the  maximum 
rates  for  transportation  within  their  respective  limits.  And  now, 
with  injunctions  by  the  railways  in  the  Federal  courts  and  man- 
damuses in  the  State  courts,  the  country  finds  itself  in  a  series  of 
legal  contests  the  like  of  which  has  never  been  known. 

POWER  OF  STATES  TO   FIX  MAXIMUM  RATES. 

Two  grave  questions  are  thus  presented : 

i.  Have  the  several  States  the  power  to  make  maximum  rates 
within  their  own  limits,  or  does  such  power  to  regulate  rates  rest 
wholly  with  Congress? 

2.  If  the  States  have  such  power,  are  the  rates  so  attempted 
to  be  made  confiscatory,  In  other  ways,  is  this  taking  their  prop- 
erty without  due  process  of  law7  ? 

67 


It  is  hardly  worth  while  to  spend  much  effort  on  the  latter  in- 
quiry. That  is  largely  a  question  of  fact  and  depending  upon  the 
evidence  in  each  case.  What  may  be  good  in  one  case  may  not 
apply  to  another.  At  best,  such  evidence  is  a  jumble  of  figures, 
speculative  and  problematical,  and  often  incomprehensible  by  the 
average  man.  It  is  at  least  highly  probable  that  with  the  aboli- 
tion of  passes  and  by  confining  themselves  to  legitimate  business 
the  railways  in  the  long  run  may  not  seriously  suffer.  The  plea 
is  sometimes  good  as  a  dilatory  plea,  but  in  the  magnitude  and 
importance  of  the  cases,  greater  constitutional  questions  arise. 

As  to  the  commerce  clause.  More  litigation  has  here  appeared 
and  more  anxiety  has  been  given  to  the  Supreme  Court  to  recon- 
cile differences  than  in  any  other  clause  of  the  Constitution.  This 
is  so  for  the  reason  that  here  more  than  elsewhere  lies  the  possible 
dividing  line  between  the  power  reserved  by  the  States  and  those 

i  delegated  to  the  Federal  government.  The  difficulty  is  not  so 
much  in  establishing  the  principles  upon  which  each  power  shall 
act,  as  in  applying  those  principles  to  the  infinite  variety  of  facts 
which  arise.  The  power  to  regulate  commerce  undoubtedly  rests 
with  Congress.  The  power  to  regulate  not  commerce,  but  things 
which  may  incidentally  affect  commerce,  undoubtedly  rests  with 

-the  several  States.  Such  powers  are  usually  known  as  the  police 
powers  of  the  State.  What,  therefore,  may  be  on  the  one  hand 
a  regulation  of  commerce  by  Congress,  and  on  the  other  an  ex- 
ercise of  police  power  by  the  State,  is  and  always  will  be  the  main 
contention  in  any  given  case.  Numberless  cases  have  thus  been 
determined  by  the  Supreme  Court. 

WHAT  CONSTITUTES  THE  POWER  TO  REGULATE  COMMERCE? 

Let  us  therefore  closely  analyze  these  two  separate  powers. 

Prior  to  the  adoption  of  the  Constitution,  the  States,  represent- 
ing the  people  therein,  had  the  sole  and  sovereign  power  over 
commerce.  Numberless  conflicts  between  them  thus  grew  up, 
especially  among  those  States  best  enjoying  commerce  with  the 
foreign  nations.  New  York  and  Massachusetts  had  by  far  the 
larger  share  over  the  more  inland  States,  and  they  were  disposed 
to  hold  it.  In  exchange  for  the  surrender  they  demanded  a  no 
less  concession  than  the  abolition  of  the  slave  trade.  This  was 
finally  agreed  to,  the  latter  to  take  effect  in  twenty  years.  It  is 
extremely  doubtful  whether  without  this  compromise  the  Union 
could  have  been  formed.  The  power  to  regulate  commerce  was 
given  to  Congress  with  the  evident  design  that  there  was  to  be 

68 


but  one  regulating  power,  and  not  thirteen  such  powers.  It  was 
only  so  there  could  be  uniformity  of  regulation  and  avoidance  of 
conflicting  interests.    As  Mr.  Webster  once  eloquently  said : 

"The  Constitution  was  the  child  of  pressing  necessity.  Unity 
and  identity  of  commerce  was  its  seminal  principle.  In  matters 
of  trade  we  were  no  longer  to  be  European,  Virginia,  Pennsyl- 
vania or  Massachusetts  men ;  we  were  to  have  but  one  commerce, 
and  that  the  commerce  of  the  United  States." 

Our  Supreme  Court  has  time  and  again  given  expression  to 
the  same  declaration.  It  has  said,  and  repeated  with  emphasis, 
that  the  United  States,  for  many  important  purposes,  are  a  single 
nation ;  that  in  all  commercial  regulations  we  were  one  and  the 
same  people ;  that  commerce  among  the  several  States  was  a  unit  « 
and  subject  to  national  control.  Every  decision  involving  the  I 
subject  from  the  days  of  Gibbons  v.  Ogden  has  clearly  affirmed 
the  principles  there  laid  down  by  the  great  Chief  Justice  Mar- 
shall, himself  a  Virginia  lawyer.  We  then  had  only  as  the  main 
instruments  of  commerce  the  sailing  and  steam  vessel.  Later  in 
the  immense  development  came  the  railway,  and  still  later  may 
come  the  airship.  But  no  matter  what  the  means  of  transporta- 
tion, the  same  principles  oim  construction  must  apply.  Com- 
merce has  been  held  to  be  extended  trade  or  intercourse,  and 
in  it  is  included  the  purchase,  sale  and  exchange  of  commodi- 
ties, as  well  as  the  means  either  of  persons  or  instrumentalities 
by  which  it  is  carried  on. 

Against  this,  the  powers  so  reserved  by  the  States  in  the  sur- 
render of  the  power  to  regulate  commerce,  are  such  as  care  for 
the  lives,  health,  morals,  education  and  comforts  of  the  people, 
and  in  their  ramifications  are  almost  endless.  The  State  in  the 
exercise  of  its  police  powers  may  grant  charters  to  the  carrier, 
may  define  the  period  of  its  duration,  the  amount  of  its  capital 
stock,  and  the  amount  of  its  indebtedness.  It  may  provide  for 
an  increase  of  stock  and  determine  where  and  how  it  is  to  be 
expended.  It  may  require  carriers  to  pay  taxes,  build  and 
maintain  proper  stations,  regulate  the  speed  of  trains  in  cities 
and  across  thoroughfares,  fence  their  tracks,  build  bridges  over 
highways,  and  in  numberless  wavs  compel  them  to  respect 
local  laws  and  usages.  In  short,  in  the  exercise  of  this  police 
power,  the  State  may  do  anvthing  except  the  one  thing  of 
regulating  commerce.  Tf  to  make  maximum  rates  for  pas- 
sengers and  freights  is  to  reeulate  commerce,  then  it  is  whollv 
without  power.    Tf,  on  the  other  hand,  to  so  make  rates  is  only 

69 


an  exercise  of  police  power,  even  though  such  act  may  inci- 
dentally affect  commerce,  then  the  acts  of  the  State  may  be 
valid. 

In  the  same  Gibbons  case,  Justice  Johnson  there  prophetic- 
ally said : 

"It  would  be  vain  to  deny  the  possibility  of  a  clashing-  and 
collision  between  the  measures  of  the  two  Governments.  The 
line  cannot  be  drawn  with  sufficient  distinctness  between  the 
municipal  powers  of  the  one  and  the  commercial  powers  of  the 
other.  When  such  collision  does  come  the  question  must  be 
decided  'how  far  the  powers  of  Congress  are  adequate  to  put 
it  down." 

That  was  in  1824,  and  the  collision  seems  to  have  now  come. 

Nearly  a  century  later,  in  1905,  in  the  Pabst  Brewing-  case, 
198  U.  S.,  the  Supreme  Court  was  obliged  to  say  that  "the 
question,  whether  a  given  State  law  is  a  lawful  exercise  of  the 
police  power  is  still  open  and  must  remain  open  to  this  Court/' 

We  are  thus  justified  in  terming  this  a  new  question. 

Sometimes  it  is  said  there  is  a  concurrent  power  in  this  mat- 
ter between  Congress  and  the  State. 

This  would  be  illogical.  It  would  be  to  subvert  a  mathematical 
axiom  by  surrendering  the  whole  and  yet  retaining  a  part. 

Sometimes,  too,  where  Congress  has  failed  to  act,  the  State 
has  been  deemed  properly  to  act.  In  1789,  soon  after  the  Con- 
stitution was  adopted,  and  Congress  found  its  inability  to  do 
certain  things,  it  passed  an  act  to  the  effect  that  where  such 
inability  appeared  the  several  States  might  provide  for  needed 
regulations  until  such  time  as  Congress  might  choose  to  exer- 
cise its  power.  Thus  it  was  that  for  a  half  century,  and  until 
the  Civil  War  Congress  did  not  assume  its  prerogative  in  the 
issues  of  money.  It  was  only  a  couple  of  years  ago,  or  more  than 
a  century  later,  that  it  gave  to  us  the  much  needed  Uniform 
Naturalization  Law.  But  in  all  cases  where  the  power  of  Con- 
gress was  allowed  to  lie  dormant,  the  moment  it  did  exercise 
the  power  that  moment  the  authority  of  the  State  fell  away. 
We  are  thus  brought  directly  to  the  question : 

Has  Congress  properly  acted?  We  here  reach  a  serious 
point  in  the  controversy. 

I  In  1887  Congress  did  assume  to  act  by  the  passage  of  the 
J  Interstate  Commerce  Act,  and  the  establishment  of  the  Com- 
|  merce  Commission.  It  acted  upon  the  theory  that  its  power 
was  noMo  make  rates,  but  to  regulate  them  after  they  had  been 

70 


made  by  the  carrier.  This  was  under  the  principle  that  even 
though  the  carrier  was  "a  public  highway"  it  was  still  entitled 
to  make  charges  for  the  service,  with  the  only  limitation  that 
such  charges  should  at  all  times  be  reasonable  and  just.  Among 
other  things  provided  by  the  Act  the  carrier  was  required  to 
file  and  publish  its  rates,  which  were  then  deemed  to  be  the 
legal  rates.  Upon  complaint,  or  even  of  its  own  motion,  the 
Commission  was  empowered  to  determine  violations.  It  then 
made  its  order.  The  weakness  of  the  Act  consisted  in  the  fact 
that  the  order  could  be  enforced  only  in  the  courts.  This  occa- 
sioned delay  and  impaired  its  value.  In  1906  Congress  made 
an  amendment  in  and  by  which  an  order  so  'made  goes  into 
effect  within  thirty  days,  and  so  remains  unless  modified  by  the 
court  or  the  Commission.  This  amendment  has  not  yet  been 
passed  upon  by  the  Supreme  Court,  but  it  is  likely  to  be  held 
valid. 

The  State  Legislatures,  or  at  least  some  of  them,  have  gone ' 
beyond  this  mere  power  to  regulate  rates.  In  the  Commodity 
Act  of  Minnesota,  April  1907,  there  is  provided  maximum  rates 
according  to  distance  and  classes  of  commodity.  These  are 
fixed  absolutely  and  the  carrier  is  forbidden  to  charge  other 
rates  under  penalty  of  imprisonment.  Yet  it  strangely  provides 
that  "it  shall  not  in  any  manner  affect  the  power  or  authority 
of  the  railroad  and  warehouse  commission,  except  that  no  duty 
shall  rest  upon  the  commission  to  enforce  any  rates  specifically 
fixed  by  this  or  any  other  statute  of  this  State."  The  Act 
further  provides  that  if  it  be  found  by  the  commission  that  such 
rates  are  not  reasonable,  the  commission  may  fix  higher  or 
lower  rates.  That  is,  the  Act  specifically  fixes  maximum  rates, 
and  if  they  are  not  high  enough  then  higher  ones  may  be  made 
by  the  commission,  or  lower,  to  suit  its  discretion.  Whether  or 
not  the  commission  did  not  already  have  that  power  must  be 
>    left  to  conjecture. 

In  the  passenger  rate  made  by  statute  a  short  time  before  a 
two-cent  maximum  rate  is  fixed  with  a  penalty  for  violation 
not  exceeding  $5,000,  and  imprisonment  not  exceeding  five 
years,  or  both.  The  railroad  and  warehouse  commission  are 
not  charged  with  its  execution.  We  thus  have  the  commis- 
sion, already  charged  with  full  powers  over  rates,  and  yet  here 
ignored  in  any  control. 

These  statutes  are  cited,  however,  only  for  the  purpose  of 
showing  that  while   Congress  undertakes  to   regulate  rates   a 

7i 


\S 


State  assumes  to  practically  fix  them.  The  Supreme  Court  has 
defined  "to  regulate"  as  meaning  "to  prescribe  the  rules  by 
which  commerce  is  to  be  governed,"  and  that  it  does  not  mean 
to  destroy.  As  late  as  1903  Justice  Harlan,  in  the  Northern 
Securities  case,  gave  expression  as  follows: 

"If  Congress  has  the  power  to  fix  such  rates,  and  upon  that 
question  we  express  no  opinion,  it  does  not  choose  to  exercise 
its  power  in  that  way  or  to  that  extent.  It  has,  as  all  will  agree, 
a  large  discretion  as  to  the  means  to  be  employed  in  the  exer- 
cise of  any  power  granted  to  it.  For  the  present  it  has  deter- 
mined to  go  np  farther  than  to  protect  the  freedom  of  com- 
merce *  *  *  by  declaring  illegal  all  contracts,  combina- 
tions, conspiracies  or  monopolies,  in  restraint  of  such  commerce 
and  make  it  a  public  offence  to  violate  the  rule  thus  prescribed. 
How  much  further  it  may  go  we  do  not  now  say." 

This  would  seem  to  be  against  any  claim  of  power  to  specific- 
ally and  in  the  first  instance  fix  rates. 

We  now  meet  in  our  way  the  fact  that  Congress  in  ail  its 
legislation,  and  the  Supreme  Court  in  its  decisions,  make  a 
difference  between  commerce,  which  affects  two  or  more  States, 
and  commerce,  which  affects  one  State  only.  In  other  words, 
a  distinction  between  interstate  commerce  and  intrastate  com- 
merce.    Is  this  a  just  distinction? 

It  is  not  likely  that  after  all  these  years  of  acting  upon  such 
distinction  we  can  expect  any  other  construction.  But  it  is  at 
least  interesting  to  see  upon  how  slender  a  thread  the  construc- 
tion hangs. 

We  have  seen  that  commerce  is  a  unit,  and  that  it  cannot  be 
divided  except  as  to  the  three  kinds  of  commerce — with  foreign 
nations,  with  Indian  tribes  and  among  the  several  States.  In 
the  first  two  the  word  with,  is  used,  while  in  the  latter  we  have 
the  word,  among.  Why  this  distinction?  Evidently  in  the  first 
two  because  alien  peoples  were  concerned,  although  one  of  them 
resided  in  the  States,  but  not  as  citizens.  When  it  came  to 
ourselves  the  word  among  was  used.  It  was  commerce  in  its 
entirety  that  was  to  be  regulated  by  Congress.  There  were 
three  classes  upon  which  the  power  was  to  act — foreign  nations, 
Indian  tribes  and  ourselves.  The  word  between  could  not  have 
been  used,  for  that  implies  a  relation  of  only  two  when  there 
were  thirteen  several  or  particular  States. y  On  its  face,  therefore, 
the  word  among  was  used  to  express  that  class  or  kind  of 
commerce   which  would  affect  any  or  all  of  the  several  States. 

72 


So  careful,  however,  seems  to  have  been  the  court  in  the 
Gibbons  case  to  not  encroach  upon  any  supposed  rights  reserved 
by  the  States  that  in  stating  the  principles  involved,  although 
not  then  necessary,  Chief  Justice  Marshall  there  gave  to  the 
little  word  among  a  definition  that  has  produced  endless  con- 
fusion ever  since.  He  says :  "The  word  among  means  inter- 
mingled with.  A  thing  which  is  among  otTienT  is  intermingled 
with  them."  He  concludes  his  argument  by  saying  that  "the 
completely  internal  commerce  of  a  State  then  may  be  consid- 
ered as  reserved"  for  the  State  itself." 

The  error,  if~s7ucTt^f-rje7~co"nsists  in  adding  the  term  inter. 
No  lexicographer  ever  gave  a  definition  including  this  term. 
The  most  that  is  said  is  that  among  means  mixed  or  mingled 
with.  But  it  by  no  means  follows  that  i't  must  be  intermingled 
with.  Taken  literally  it  would  be  such  commerce  as  is  mixed 
with  the  several  States,  and  not  commerce  mixed  with  foreign 
nations  or  Indian  tribes.  The  Century  Dictionary  defines 
among  as  in,  in  the  midst  of,  in  the  class  or  number  of,  in 
connection  with,  etc.  The  word  is  Saxon,  made  up  of  two 
other  words,  on  (in)  and  gemang  (crowd  or  assembly).  Com- 
merce among  the  several  States  becomes  commerce  in  or  in 
the  class  of  the  several  States.  We  also  have  the  old  word, 
Witenagemot,  the  assembly  of  wise  men,  in  the  days  of  Wessex, 
King  of  Britain. 

THE   DISTINCTION   ONE   OF  THEORY,   NOT  OF   PRACTICE. 

In  theory  the  definition  is  without  good  reason.  Why  should 
it  be  interstate  commerce  between  Duluth  and  Superior,  a  few 
miles  apart,  where  two  States  are  concerned,  and  State  com- 
merce between  Duluth  and  Minneapolis,  one  hundred  and  fifty 
miles  apart,  and  only  one  State  concerned?  Why  is  it  not 
commerce  in  any  part  of  the  country?  How  can  it  be  divided 
when  it  has  been  surrendered? 

In  practice  the  distinction  has  almost  wholly  been  lost.  Not 
fifteen  per  cent,  of  the  commerce  is  internal  with  the  State. 
Some  authorities  estimate  it  as  low  as  five  per  cent.  The  car- 
rier gets  a  charter  from  the  State,  and  soon  crosses  into  an- 
other State,  and  stretches  midway  across  the  continent.  If  a 
train,  so  made  up,  happens  to  have  a  car  destined  to  a  point 
within  the  State,  does  that  particular  car  lose  its  identity  with 
the  train?  It  is  simply  one  and  all  commerce,  intermingled  and 
undivided,  carried  by  the  same  company,  pulled  by  the  same 

73 


engine,  manned  by  the  same  crew,  and  it  passes  on  its  journey 
regardless  of  State  lines.  Even  though,  as  in  the  Minnesota  iron 
mines,  the  railways  operate  wholly  within  the  State,  yet  the  com- 
merce they  carry  is  destined  for  other  States,  and  the  commerce 
begins  the  moment  it  starts.  This  was  long  ago  settled  in  the 
Daniel  Ball  case. 

With,  therefore,  the  Interstate  Commerce  Commission  acting 
under  the  law  of  its  creation,  and  assuming  to  deal  only  with 
commerce  involving  two  or  more  States,  the  only  possible  hold 
it  can  have  upon  commerce  within  the  limits  of  the  State  is, 
that  where  rates  are  made  by  the  different  State  authorities 
such  rates  necessarily  and  directly  interfere  and  conflict  with 
rates  established  by  that  Commission.  Assuming  this  to  be 
true,  and  that  in  the  very  nature  of  things  there  cannot  be 
forty-six  separate  regulating  powers  for  the  commerce  of  the 
country,  yet  it  is  a  somewhat  slippery  foundation  upon  which 
to  rest  things  of  such  vast  moment  and  magnitude.  There 
would  now  seem  to  be  a  grave  necessity  for  a  full  reconsidera- 
tion of  the  subject.  It  is  a  most  significant  fact  that  while  the 
distinction  has  been  made  in  State  and  interstate  commerce,  no 
such  distinction  appears  in  the  control  of  the  navigable  waters, 
wherever  situated.  And  yet  commerce  in  either  case  is  to  be 
regulated  under  the  same  commerce  clause  of  the  Constitution. 
No  power  there  seems  to  have  been  allowed  "to  lie  dormant," 
but  on  the  contrary.  Congress  annually  appropriates  money  for 
their  improvement,  now  nearly  $20,000,000.  Is  it,  we  may 
pertinently  ask,  a  case  of  appropriations  "following  the  flag"? 

PRECEDENCE  OF  COMMERCIAL  OVER  POLICE  POWERS. 

We  are  met  by  the  assertion,  shall  not  the  Sovereign  State 
(with  a  big  S)  control  the  corporation  of  its  own  creation?  Most 
assuredly  it  should,  subject  only  to  the  limitation  of  the  power 
surrendered  in  the  beginning.  The  question  at  last  comes  to 
this  issue:  Is  the  rate-regulating  power  a  police  power,  or  is 
it  a  commercial  power? 

We  find  a  good  illustration  in  a  case  lately  heard  in  North 
Carolina.  The  commission  of  that  State  ordered  the  railway 
company  to  restore  a  station  which  had  been  closed  by  the 
company.  Justice  White,  United  States  Circuit  Court,  upheld 
the  order,  and  on  the  sole  ground  that  for  the  convenience  of 
rthe  people  the  State  in  the  exercise  of  its  police  powers  had 
full  control.    It  was  not  a  commercial  power. 

74 


If  it  shall  be  held  by  the  Supreme  Court  that  in  the  cases 
now  pending  Congress  has  properly  acted,  and  that  the  State 
Legislatures  have  exceeded  their  true  powers,  can  it  be  said 
that  the  efforts  on  their  part  are  without  value?  By  no  means. 
Even  if  wrong  as  to  the  methods  pursued,  they  are  right  in  the 
objects  to  be  attained.  It  is  not  likely  that  the  old  rates  will 
ever  be  restored.  Without  such  action  by  the  States  public 
sentiment  could  never  have  been  focused.  They  are  a  plain 
notice  to  Congress  and  its  Commission  that  if  this  duty  is 
theirs  it  must  be  met  with  more  vigor  and  more  wisdom  than 
has  heretofore  been  shown.  That  Commission,  acting  up  to 
its  full  measure  of  responsibility,  thus  comes  to  be  the  most 
important  administrative  department  of  the  Government,  and 
next  only  in  value  to  the  Supreme  Court  itself.  And  it  is  well 
to  remember  the  fact  that  whenever  a  controversy  with  either 
Congress  or  the  Executive  has  heretofore  arisen,  public  confi- 
dence has  usually  followed  the  Court.  There,  at  last,  is  the 
sheet-anchor  of  our  safety. 

If  in  the  crisis  through  which  we  are  passing  there  be  any 
who  fear  an  encroachment  upon  the  rights  of  the  States,  and 
a  dangerous  centralization  of  power  in  the  Federal  Government, 
to  them  let  me  commend  the  inspiring  words  of  the  great  Madi- 
son— "The  Father  of  the  Constitution" — when  urging  upon  his 
fellow-citizens  the  adoption  of  that  sacred  instrument: 

"The  powers  proposed  to  be  lodged  in  the  Federal 
Government  are  as  little  formidable  to  those  reserved  to 
the  individual  States  as  they  are  indispensably  necessary 
to  accomplish  the  purposes  of  the  Union;  and  all  those 
alarms  which  have  been  sounded  of  a  meditated  and  con- 
sequent annihilation  of  the  State  Governments  must,  on 
the  most  favorable  interpretation,  be  ascribed  to  the 
chimerical  fears  of  the  authors  of  them." 

The  following  paper  on  the  "Conflict  Between  Federal  and 
State  Courts,"  prepared  by  Mr.  David  P.  Marum,  a  delegate 
from  Oklahoma,  was  then  read  by  title : 

Mr.  David  P.  Marum. 

Mr.  Chairman:  This  question  is  to-day  as  unsettled  as  it 
was  in  the  year  of  1838.  For  several  years  prior  to  the  death 
of  Chief  Justice  Marshall,  the  question  as  to  whether  or  not  the 
Supreme  Court  of  the  United  States  had  the  power  to  declare 
void  a  legislative  enactment  of  a  sovereign  State,  then,  as  now, 

75 


involving  the  question  of  sovereignty,  puzzled  the  greatest  law- 
yers that  the  world  had  ever  produced.  The  Supreme  Court  of 
the  United  States  was  hopelessly  divided  upon  the  question  pre- 
sented for  their  consideration  in  four  cases,  viz: 

Briscoe  et  al.  vs.  The  Commonwealth  Bank,  of  Kentucky. 

Proprietors  of  Charles  River  Bridge  vs.  Proprietors  of  War- 
ren Bridge. 

Pool  et  al.  vs.  Lessee  of  Fleeger  et  al. 

The  Mayor,  etc.,  of  New  York  vs.  Miln. 

The  questions  involved  in  the  above  cases  had  been  pending 
in  the  Supreme  Court  of  the  United  States  from  1831  until 
1838.  At  the  last  term  of  court  over  which  Chief  Justice  Mar- 
shall presided  these  cases  were  continued  for  the  term  because 
the  Chief  Justice  had  no  assurance  that  all  the  members  of  the 
court  would  be  present  at  that  term  and  he  wanted  the  grave 
questions  to  be  passed  upon  by  the  whole  bench.  This  was 
ostensibly  the  reason  why  the  cases  were  continued,  but  prac- 
tically, the  reason  was  that  the  Chief  Justice  did  not  have 
concurring  with  him  upon  his  views  of  how  the  cases  should  be 
decided  a  majority  of  the  bench,  as  the  next  term  of  court,  pre- 
sided over  by  his  successor,  shows. 

POWER  OF  UNITED  STATES  SUPREME  COURT  DECLARES  STATE 

LAW  INVALID. 

The  contention  of  the  Chief  Justice  that  the  Supreme  Court 
had  the  power  to  declare  a  law  of  a  sovereign  State  invalid,  was 
upheld  by  the  court  at  that  time,  but  they  decided  that  the  ques- 
tions embraced  in  the  foregoing  cases  were  not  in  violation  of 
the  United  States  Constitution. 

The  enactments  covered  what  was  supposed  to  be  a  violation 
of  a  contract,  an  interference  with  interstate  commerce,  the 
power  of  the  State  bank  to  issue  money,  or  as  was  claimed,  bills 
of  credit  which  the  State  itself,  under  the  Constitution  was  pro- 
hibited from  issuing. 

The  fourth  question  was  not  so  grave,  viz:  The  power  of 
two  sovereign  States  to  amicably  adjust  the  dividing  line  be- 
tween themselves  without  appealing  to  the  Supreme  Court  to 
settle  the  controversy. 

In  unmistakable  terms  at  that  time  the  Supreme  Court  an- 
nounced that  whenever  it  was  necessary  for  that  court  to  de- 
cide a  question  as  to  the  validity  or  invalidity  of  a  State  law, 
they  would  not  hesitate,  but  would  perform  their  duty.     Judge 

76 


Baldwin  wrote  a  supplemental  concurring  opinion  in  each  of 
the  cases,  and  also  a  history  of  the  origin  and  nature  of  the 
Constitution,  with  his  views  upon  the  questions  involved,  judge 
Baldwin  said  what  is  applicable  at  this  time : 

"There  is  no  task  more  difficult  and  invidious  than  to  decide 
who  were  those  eminent  and  distinguished  members  of  the  pro- 
fession in  former  times,  and  who  now,  or  to  whose  opinion  the 
court  of  last  resort  ought  to  pay  judicial  deference,  and  who 
were  and  are  yet  deserving  of  such  distinguished  notice.  Judges 
would  incur  great  hazard  in  making  the  selection  and  would 
form  their  opinions  by  very  fallible  standards  if  they  looked 
beyond  the  State  law  on  which  the  case  arises — the  provision 
of  the  Constitution  which  applies  to  it  and  the  purported  rules 
and  principles  which  have  been  established  by  the  judicial  au- 
thority. 

"It  is  a  risk  which  I  will  not  incur  on  any  account  involving 
the  constitutionality  of  a  State  law;  for,  if  the  case  should  be  so 
doubtful  that  any  man's  opinions,  either  way,  which  are  not 
strictly  judiciary  and  authoritative  would  turn  the  scale,  I  would 
overlook  them  and  decide,  according  to  the  settled  rule  of  this 
court,  that  in  every  case  the  presumption  is  that  the  State  law 
is  valid,  and  whoever  alleges  the  contrary  is  bound  to  show  and 
prove  it  clearly. 

"In  obedience  to  this  rule,  I  cannot  recognize  in  any  private 
opinions  of  any  description,  by  whomsoever  or  howsoever  ex- 
pressed or  promulgated,  any  authority  for  rebutting  such  pre- 
sumption. 

Ht  *  *  H*  *  *  * 

"There  is  no  court  in  any  country  which  is  invested  with  such 
high  powers  as  this.  The  Constitution  has  made  it  the  tribunal 
of  the  last  resort  for  the  decision  of  all  cases  of  law  or  equity 
arising  under  it. 

'The  25th  section  of  the  judiciary  act  has  made  it  our  duty 
to  take  cognizance  of  writs  of  error  in  State  courts  in  cases  of 
the  most  important  and  delicate  nature.  They  are  those  only 
in  which  the  highest  court  has  adjudged  a  State  law  to  be  valid, 
notwithstanding  its  alleged  repugnance  to  the  Constitution  a 
law  or  a  treaty  of  the  United  States. 

"When  this  court  reverses  the  judgment,  they  overrule  both 
the  legislative  and  judiciary  authority  of  the  State  without  re- 
gard to  the  court  or  stand,  politically  or  judicially,  of  individual 
members   of   either  department.     Surely   then   it    is   our   most 

77 


solemn  duty  not  to  found  our  judgment  upon  the  opinion  of 
those  who  assume  to  decide  on  the  validity  of  State  law  with- 
out any  official  power,  sanction  or  responsibility. 

"If  we  deferred  to  political  authority  then  the  three  branches 
of  the  legislative  power,  of  the  judicial  authority  the  highest  is 
the  solemn  judgment  of  the  members  of  that  court  in  which  is 
vested  the  Supreme  Judicial  power  of  the  State. 

"And  there  is  another  still  higher  consideration  which  arises 
from  the  effect  of  a  final  judgment  of  this  court,  under  the  25th 
section.  It  is  irreversible.  It  is  capable  of  no  correction  or 
modification,  save  by  an  amendment  to  the  Constitution.  It 
must  be  enforced  by  the  executive  power  of  the  Union  and  the 
State  must  submit  to  the  prostration  oi  the  law  and  its  conse- 
quences, however  severe  the  operation  may  be.  That  the  case 
ought  to  be  clear  of  any  reasonable  doubt  in  the  minds  of  the 
court  either  as  to  the  law  or  its  application,  this  proposition  is 
self  evident,  and  there  are  no  cases  to  which  the  rule  applies 
with  more  force  than  to  this  which  turn  on  the  obligation  of 
contracts. 

"If  we  steadily  adhere  to  it  as  a  fundamental  rule  that  the 
judgment  of  a  Supreme  Court  of  a  State  on  the  validity  of  its 
statutes  shall  stand  firm  until  it  is  proved  to  be  erroneous,  the 
effect  would  be  most  important  on  constitutional  questions  and 
lead  to  a  course  of  professional  and  judicial  opinion  which 
would  soon  assign  to  the  now  all  doubtful  parts  of  the  Consti- 
tution a  different  and  established  meaning." 

PRESENT-DAY  APPLICATION. 

How  like  to-day  are  the  conditions  dreaded  by  the  great 
judges  who,  at  that  time,  formed  the  Supreme  Court  of  the 
United  States.  The  power  claimed  by  them  is  to-day  conceded 
to  be  in  that  court  whether  the  Constitution  was  brought  into 
existence  by  "We,  the  people  of  the  United  States,  or  by  the 
sovereign  States  of  America,  uniting  to  form  one  nation." 

The  Constitution  of  the  United  States  confers  only  a  limited 
power  upon  Congress.  The  only  limit  upon  the  sovereign 
States  is  their  own  constitutions,  and  that  their  laws  shall  not 
conflict  with  the  Constitution  of  the  United  States  or  entrench 
upon  any  of  the  powers  granted  to  the  National  Government 
by  the  Constitution  and  the  amendments  thereto.  Such  being 
the  case,  and  having  a  court  with  such  powers,  as  is  the  Su- 
preme Court  of  the  United  States,  the  judges  of  which  from  its 

78 


very  foundation,  have  ranked  as  the  peers  of,  if  not  the  su- 
periors of,  any  like  body  of  men  in  any  part  of  the  world,  it 
seems  that  this  unlimited  power  granted  to  the  court  by  the 
Constitution,  has  been  responded  to  by  the  character  of  the 
men  who  have  been  placed  as  judges  to  interpret  the  Consti- 
tution and  enforce  the  laws  enacted  by  Congress. 

INFERIOR   COURTS    SHOULD   NOT   PASS   UPON   CONSTITUTION- 
ALITY. 

From  its  inception  to  the  present  day  it  is  impossible  to  point 
at  a  single  judge  the  finger  of  scorn  or  contumely.  They  have 
been  without  exception  great  judges  and  patriotic  citizens  of 
their  country.  Such  being  the  case,  the  connection  between 
the  sovereignty  of  a  State  and  the  sovereignty  of  a  nation  being 
so  close,  the  interfering  by  the  inferior  courts  with  the  enforce- 
ment of  State  laws  should  be  prohibited  by  suitable  legislation 
in  Congress  granting  original  jurisdiction  to  the  Supreme 
Court,  upon  the  question  as  to  the  validity  or  constitutionality 
of  any  State  law  that  may  be  involved  in  any  case  pending  in 
any  Federal  District  or  Circuit  Court.  When  the  Supreme 
Court  speaks,  it  speaks  with  authority.  When  the  District  or 
Circuit  Court  speaks,  not  having  the  authority,  many  of  their 
decisions  are  a  source  of  irritation  to  the  people  at  large.  This 
could  be  avoided  by  certifying  to  the  Supreme  Court  the  ques- 
tion of  law  and  suspending  all  action  upon  the  case  until  the  ques- 
tion is  answered.  Of  course,  when  once  answered  that  law  will 
forever  be  held  valid,  or  invalid  according  to  the  decision  of 
the  court. 

The  same  proposition  should  be  enacted  and  carried  out  in 
the  inferior  courts  of  the  State ;  none  but  the  Supreme  Court 
to  be  allowed  to  pass  upon  the  question  as  to  whether  or  not 
the  enactment  of  a  State  Legislature  was  valid  or  invalid. 

This  recommendation  is  made  by  one  who  has  the  highest 
regards  for  the  judiciary  of  the  States,  and  of  the  nation, 
whether  the  Supreme  or  the  inferior  courts.  Knowing  the 
functions  and  danger  of  our  dual  form  of  government,  which 
neither  interferes  by  their  authorities  with  the  rights  of  the 
other,  the  dignity  of  District  or  Circuit  Court  judges,  either  of 
the  United  States,  or  of  the  State  courts,  amount  to  but  very 
little  in  comparison  with  the  growth,  the  happiness  and  the 
prosperity  of  eighty  millions  of  people. 

79 


ANOMALOUS  STATUS  OF  EMPLOYERS'  LIABILITY  ACT  UNDER 
RECENT  DECISIONS. 

We  have  had,  during  the  past  year,  many  carious  illustra- 
tions of  the  workings  of  great  courts  of  like  jurisdiction  with- 
out competent  authority  to  finally  decide  the  acts,  rendering  in 
different  circuits  of  the  United  States,  different  decisions  upon 
the  laws  passed  by  Congress.  The  Employers'  Liability  Bill 
was  enacted  by  Congress  June  n,  1906,  and  at  this  time,  six  Dis- 
trict or  Circuit  Courts  of  the  United  States  have  passed  on  the 
constitutionality  of  this  legislative  enactment.  Four  courts  have 
held  this  law  to  be  constitutional,  while  two  courts  of  equal 
jurisdiction,  with  judges  of  equal  learning  and  patriotism  and 
knowledge,  have  held  the  enactment  to  be  unconstitutional.  We 
thus  have  the  anomaly  that  might  be  continued  for  years,  of 
having,  in  different  sections  of  the  United  States  an  Act  of 
Congress  that  is  constitutional  in  one  jurisdiction  and  uncon- 
stitutional in  another.  If  they  cannot  speak  with  authority 
in  the  first  instance,  why  speak  at  all?  Why  not  certify  the 
question  to  the  court  that  has  the  authority,  and  why  suspend 
in  some  jurisdictions  for  years  an  enactment  of  Congress  that 
may  be  constitutional  when  decided  by  the  proper  court?  Or 
why  continue  it  in  existence  for  years  to  have  it  finally  deter- 
mined when  a  case  reaches  the  Supreme  Court  of  the  United 
States,  that  it  is  unconstitutional?  Property  rights,  liberty,  life 
and  happiness  of  the  people  of  the  United  States  may  have, 
during  this  long  litigation,  been  destroyed  or  the  reverse.  It  is 
best  when  questions  arise,  as  they  are  doing  every  day,  to  have 
them  settled  permanently  and  with  authority  at  once. 

AN   OKLAHOMA   EXPERIENCE. 

Another  illustration  of  the  power  claimed  by  the  judiciary  of 
the  inferior  courts  which  needs  only  be  cited  to  show  its  ab- 
surdity, happened  during  the  past  few  weeks  in  Oklahoma 
where,  under  the  power  that  a  probate  judge  has  to  act  in  grant- 
ing writs  of  injunction  in  cases  pending  in  the  District  Court, 
during  the  absence  of  the  district  judge  from  the  county, 
1,500,000  people  were  prevented  by  a  probate  judge  who  has  no 
more  power,  practically  in  criminal  or  civil  matters  in  his  own 
jurisdiction  than  has  a  Justice  of  the  Peace,  from  holding:  an 
election  to  decide  whether  or  not  Oklahoma  would  be  a  State 
or  remain  a  Territory.  The  action  of  this  probate  judge 
stopped  the  wheels  of  the  constitutional  convention  assembled 

80 


together  by  the  votes  of  the  people  of  Oklahoma  under  au- 
thority of  an  Act  of  Congress,  until  such  time  as  the  Supreme 
Court  of  the  Territory  of  Oklahoma  should  ascertain,  at  its 
next  meeting,  whether  or  not  even  the  Supreme  Court  of  the 
Territory  of  Oklahoma  had  any  power  to  interfere  with  the  ac- 
tion of  the  constitutional  convention  or  power  to  prevent  an 
election  being  held  to  declare  whether  or  not  Oklahoma  would 
be  a  State  or  Territory ;  which  decision  was  promptly  made  by 
the  Supreme  Court  and  the  people  were  permitted  to  either 
adopt  or  reject  the  Constitution  forming  a  State  government 
as  one  of  the  sovereign  States  of  the  Union.  It  is  the  act  of 
judges,  whether  State  or  Federal,  who  have  no  power  to  speak 
with  authority  that  lead  to  such  conditions  in  the  courts  of  our 
Union.  It  may  take  an  amendment  to  the  Constitution  before 
these  questions  can  be  finally  settled,  but  they  must  be  settled 
or  great  danger  is  in  front  of  the  people  who  will  form  the  next 
generation  living  in  the  United  States.  Prevailing  over  this 
land  and  great  nation  is  a  spirit  of  unrest  and  dissatisfaction 
and  I  might  say  great  interest  in  the  affairs  of  the  nation.  For 
forty  years  the  people  of  the  United  States  have  not  paid  much 
attention  to  decisions  of  courts  or  actions  of  legislative  bodies, 
having  had  plenty  to  occupy  their  minds  in  reducing  to  cultiva- 
tion the  large  areas  that  now  form  many  of  the  Western  States, 
in  developing  the  mineral  resources  of  the  Rocky  Mountains  and 
other  parts,  that  forty  years  ago  were  almost  unknown  to  the 
people  of  the  United  States.  That  period  has  passed  and  the 
people  are  now  asking,  What  have  we  received  for  forty  years 
of  hard  labor?  If  we  believe  the  newspapers,  we  have  a 
judiciary  that  will  issue  the  great  writs  for  the  benefit  of  classes. 

IS  CLASS  LEGISLATION  PREVALENT? 

If  we  look  to  the  legislative  enactments  as  the  newspapers 
report  them,  we  find  that  many  of  our  laws  have  been  placed 
upon  the  statute  book  to  enable  a  few  men  to  grasp  into  their 
hands  the  billions  of  wealth  produced  by  the  toiling  masses  dur- 
ing this  period. 

The  reason  for  this  interest  now  shown  by  the  people  can  be 
accounted  for  by  the  growth  of  education  during  the  latter  part 
of  this  period.  There  is  not  a  State  west  of  the  Ohio  River 
that  does  not  support  educational  institutions  where  every  child, 
if  so  desired,  mav  obtain  an  education  as  complete  as  can  be 
obtained  in  the  older  colleges  of  this  land,  without  costing  one 

81 


cent.  It  will  be  impossible  to  keep  in  harmony  with  the  con- 
ditions that  exist  this  educated — I  might  say  pauper,  because 
the  majority  of  graduates  from  our  universities  and  colleges 
are  paupers  in  comparison  with  the  sons  and  daughters  of  the 
multi-millionaires — whom  the  laws  and  the  courts,  by  their  de- 
cisions, have  allowed  to  get  control  of  nearly  all  the  wealth  of 
the  United  States.  For  these  reasons  will  be  seen  why  the 
Constitutional  Convention,  which  lately  wrote  the  Constitution 
of  the  State  of  Oklahoma,  placed  within  its  ordinances  declara- 
tions that  will  prohibit,  if  not  interfered  with  by  higher  courts, 
this  continual  absorption  of  the  wealth  produced  by  the  masses, 
by  a  few  people  that  we  call  monopolies.  This  is  the  reason 
that  a  cry  has  gone  up  from  Maine  to  Oregon  in  the  news- 
papers owned  and  controlled  by  corporate  wealth  that  the  pro- 
visions of  the  Oklahoma  Constitution  are  so  drastic  that  the 
President  of  the  United  States  should  not  issue  his  proclama- 
tion declaring  Oklahoma  a  State,  notwithstanding  that  it  has 
1,500,000  people  who  are,  if  I  may  say  it,  beyond  the  average 
population  of  any  State  now  in  the  American  Union  in  intelli- 
gence and  education.  Including  the  negro  and  a  few  blanket 
Indians  in  Oklahoma  the  per  cent,  of  illiteracy  will  be  less  than 
2  per  cent. ;  a  percentage  that  cannot  be  claimed  for  any  of  the 
older  States.  It  was  farmers  who  wrote  that  Constitution,  as 
it  was  people  of  but  little  education  that  eighteen  hundred 
years  ago  were  selected  to  promulgate  the  doctrines  of  Chris- 
tianity that  now  prevail  in  every  part  of  the  world.  Included 
in  our  convention  were  a  body  of  men  called  the  twelve  apostles 
(being  the  minority  party).  Unlike  eleven  of  their  predecessors 
they  did  not  choose  the  better  way,  but  wanted  to  give  all 
power  to  the  legislative  branch  instead  of  to  the  people. 

No  person,  as  I  understand  it,  objects  to  the  authority  of  the 
Supreme  Court  of  the  United  States,  nor  do  thev  object  to  the 
authoritv  of  the  Supreme  Court  of  their  own  States,  as  limited 
bv  the  State  Constitutions,  to  pass  upon  all  these  cmest1'ons  that 
the  people  are  now  studying  for  themselves.  It  mav  take  Con- 
stitutional amendments  to  place  these  Questions  in  the  Supreme 
Courts  as  original  subiects  of  jurisdiction  in  the  different  sov- 
ereienties,  national  and  State,  of  which  our  nation  is  composed ; 
but  better  to  amend  than  to  have  a  single  conflict  arise  be- 
tween the  different  sovereignties.  We  of  this  generation  have 
had  enough  of  that. 

Some  learned  bodies  recommend  the  repeal  of  the  Fourteenth 

82 


Amendment  as  a  panacea  for  the  troubles  now  existing  between 
sovereign  States  and  the  judges  of  inferior  Federal  courts.  The 
Fourteenth  Amendment  was  not  in  existence  at  the  time  when 
the  great  court  presided  over  by  Marshal  were  unable  for  six 
years  to  agree  upon  what  would  be  the  proper  decision  of  that 
court  in  passing  upon  the  enactment  of  a  State  legislature  as 
to  whether  it  was  valid  or  invalid.  That  court  has  settled  this 
question  as  to  their  power,  but  they  have  not  said  that  this 
power  shall  be  granted  by  any  enactment  of  Congress  to  any 
courts  inferior  to  them.  The  people  have  great  confidence  and 
trust  in  the  Supreme  Courts  of  our  country.  Let  us,  therefore, 
try  and  keep  the  confidence  of  our  people  in  that  court,  whose 
decisions  have  met  such  universal  approval.  Let  us  wipe  out 
the  conditions  that  arise  by  courts  of  equal  jurisdiction  giving 
different  decisions  upon  same  subject.  Let  us  tell  the  probate 
judge  that  it  is  not  his  power,  nor  the  power  of  the  court  that 
he  represents  in  the  absence  of  the  regular  judge  from  his 
county,  to  interfere  with  such  questions  as  to  whether  or  not  a 
sovereign  people  can  submit  to  a  vote  a  Constitution,  or 
whether  the  legislature  of  a  sovereign  State  can  enact  without 
Mr.  Probate  Judge  or  any  inferior  power  in  the  State  passing 
upon  the  validity  of  any  law  except  the  one  supreme  judicial 
power,  viz.,  the  Supreme  Court  of  the  State  and  nation. 

THE  CHAIRMAN:  The  Committee  of  Fifteen  on  Rules, 
Order  of  Business  and  Permanent  Organization,  authorized  at 
an  earlier  period  this  morning,  are  requested  to  meet  immedi- 
ately in  room  200,  Stratford  Hotel,  and  the  chair  is  authorized 
to  announce  that  it  has  been  arranged  for  the  members  of  the 
committee  to  take  luncheon  together.  The  committee  is  con- 
stituted as  follows: 

Frank  A.  Faxon  (Mo.)  R.  H.  Whitelaw  (Mo.) 

Theodore  Marburg  (Md.)  James  O'Connell  (D.  C.) 

Mahlon  N.  Kline  (Penna.)  Daniel  J.  Keefe  (Mich.) 

D.  A.  Tompkins  (N.  C.)  James  B.  Reynolds  (N.  Y.) 

John  F.  Crocker  (Mass.)  Charles  H.  Smith  (111.) 

David  P.  Marum  (Okla.)  A.  T.  Ankeny  (Minn.) 

George  Langford  (Oregon.)        Marcus  M.  Marks  (N.  Y.) 
Jno.  W.  Tomlinson   (Ala.) 

THE  CHAIRMAN:  Without  objection  the  conference  will 
stand  adjourned  until  2 :30  this  afternoon.  There  will  be  an 
evening  session,  beginning  at  8:15. 

83 


Second  Session,  October  22,  3  P.  M. 

The  afternoon  session  of  Tuesday,  October  22,  was  called  to 
order  by  the  chairman  at  3  o'clock  P.  M. 

THE  CHAIRMAN :  The  chair  is  requested  to  announce  that 
the  delegates  representing  associations  of  manufacturers,  job- 
bers or  retailers  are  requested  to  meet  at  the  Victoria  Hotel  at 
6  o'clock  this  evening.  Arrangements  have  been  made  to  serve 
a  dinner  at  that  hour,  and  it  is  proposed  at  this  gathering  to 
arrange  a  program  for  Thursday,  when  the  representatives  of 
trade  organizations  will  be  given  a  hearing.  Those  who  will  at- 
tend this  gathering  at  the  Victoria  are  requested  to  notify  Mr. 
Campbell,  of  the  Committee  on  Arrangements,  who  will  be  found 
at  the  place  of  registration  in  this  hall,  to  the  end  that  provision 
may  be  made  for  all  who  may  find  it  possible  to  attend. 

The  chair  has  the  pleasure  of  presenting,  as  the  first  speaker 
of  the  afternoon,  the  Hon.  John  W.  Tomlinson,  of  Birmingham, 
Ala.,  whose  topic  is,  "Shall  Federal  Jurisdiction  Be  Extended  in 
the  Solution  of  the  Trust  Problem?" 

Hon.  John  W.  Tomlinson. 

Mr.  Chairman — The  answer  to  the  above  question  will 
very  generally  be  in  the  affirmative,  but  in  most  instances  with 
qualifications.  Those  to  be  regulated  will  answer  yes,  provided 
there  is  to  be  regulation,  and  provided  further  that  Federal 
shall  exclude  State  authority.  There  is  another  class,  believing 
in  a  centralized  government,  who  will  make  the  same  qualifica- 
tions; and  there  are  those  believing  in  our  dual  government 
who  have  been  discouraged  on  account  of  complications  of 
conflicting  jurisdictions  and  delays  incident  thereto,  and  are  in- 
clined for  that  reason  to  want  one  jurisdiction.  But  the  great 
conservative  class  in  this  country,  knowing  the  value  of  the 
permanence  of  their  institutions  and  government,  will  not  favor 
the  extension  of  Federal  to  the  exclusion  of  State  jurisdiction, 
but  will  demand  the  retention  and  extension  of  both  jurisdic- 
tions, to  the  end  that  those  to  be  regulated  may  be  held  in  the 

84 


legitimate  channels  of  legitimate  business,  and,  when  engaged  in 
public  service,  shall  be  held  to  a  fair  return  on  property  invested 
at  a  fair  valuation. 

STATE  AND  FEDERAL  CONTROL  BOTH  NEEDED. 

It  will  be  very  generally  conceded,  I  think,  that  the  accumula- 
tion of  wealth  in  the  few,  and  its  further  concentration  in 
gigantic  organizations,  doing  and  handling  interstate  commerce, 
has  brought  about  conditions  which  did  not  exist  in  the  early 
history  of  our  country — introduced  a  new  power  in  the  land 
second  only  to  government  itself — necessitating  efficient  govern- 
ment regulation ;  and  I  think  it  can  be  demonstrated  that  it 
will  require  both  national  and  State  authority  in  dealing  with 
the  condition.  In  fact,  I  fail  to  see  why  those  seeking  popularity 
with  the  people  in  advocating  this  needed  remedy  desire  to  do 
away  with  either.  If  you  have  two  remedies,  is  it  not  common 
sense  to  hold  on  to  both,  even  though  one  is  regarded  more 
efficient  than  the  other?  Why  proclaim  want  of  power  in  the 
States,  when  Alabama,  Georgia,  North  Carolina,  Arkansas, 
Missouri  and  Minnesota  recently  have  enacted  and  enforced 
laws  giving  substantial  relief? 

IS  FEDERAL  CONTROL  EFFECTIVE? 

Furthermore,  what  guaranty  have  the  people  that  they  would 
have  effective  Federal  regulation?  The  Federal  is  not  so  close 
to  the  people  as  the  State  Government,  and  not  so  easily  con- 
trolled by  them.  Could  not  the  regulated  more  easily  control 
the  election  in  one  jurisdiction  than  in  many,  and  would  it  not 
be  a  great  temptation,  where  millions  and  millions  of  dollars 
are  at  stake,  to  resort  to  corrupt  practices?  Again,  it  is  said 
that  State  authority  is  delayed  and  rendered  ineffective  by  in- 
junctions, which  is  only  partly  true,  as  many  railroads  are 
obeying  the  State  laws ;  but  those  who  make  this  point  must 
know  that  the  same  dilatory  tactics  would  be  available  as  to 
Federal  regulation,  as  Federal  courts,  then  alone  having  juris- 
diction, would  become  so  crowded  with  litigation  as  to  cause 
delay  equivalent  to  denial  of  relief. 

It  is  further  argued  on  behalf  of  exclusive  Federal  regulation 
that  these  organizations,  engaged  in  doing  or  handling  nation- 
wide interstate  commerce,  should  not  have  to  comply  with  the 
laws  of  the  States  in  which  they  do  business.     Does  not  the 

85 


business  man  of  England,  France  or  Germany  have  to  obey 
the  laws  of  the  different  countries  in  which  he  trades?  Does 
not  the  business  man  of  this  country,  in  taking  advantage  of 
the  worldwide  business  the  nation  has  made  for  him,  have  to 
obey  the  laws  of  the  countries  where  he  deals?  Does  he  not, 
in  some  instances,  sell  in  foreign  countries  at  a  higher  price  than 
to  his  own  countrymen?  Is  it  asking  too  much  of  him  that  he 
shall  conform  to  the  local  laws  of  the  States  of  his  own  country? 

FEDERAL    INCORPORATION    AIMS    TO    ELIMINATE    STATES. 

In  the  solution  of  these  problems  under  discussion,  national 
incorporation  has  been  suggested,  but  why  the  necessity  of 
this?  Cannot  the  national  Government  license,  regulate  and 
inspect,  under  appropriate  laws  passed  for  that  purpose,  organi- 
zations doing  or  handling  interstate  commerce  as  effectually 
as  if  they  were  incorporated  under  national  law?  It  is  evident, 
therefore,  that  the  only  purpose  of  this  step  is  to  eliminate  the 
States.  But  a  national  incorporation  law  Which  failed  to  recog- 
nize the  constitutional  rights  of  the  States  in  the  premises 
would  be  unconstitutional.  However,  it  has  gone  out  from  high 
authority  in  this  country,  in  the  discussion  of  this  subject,  that 
"sooner  or  later  constructions  of  the  Constitution  will  be  found 
to  vest  this  power  where  it  will  be  exercised  by  the  national 
Government" — "a  method,"  says  Mr.  Bryce  in  his  American 
Commonwealth,  "discovered  by  the  ingenuity  of  lawyers  to 
change  organic  law  indirectly  when  it  is  known  that  it  cannot 
be  done  directly." 

And  yet,  however  much  the  delegates  assembled  here  may 
differ  in  other  matters,  I  feel  sure  that  all  will  concur  in  this 
proposition :  That  in  the  solution  of  these  problems,  as  well 
as  in  the  enforcement  of  the  plan  adopted,  the  law  shall  be' 
respected ;  that  if  our  organic  law  needs  to  be,  it  shall  be  changed 
as  prescribed  by  law;  for  if  the  law  is  not  observed  by  those 
in  authority,  how  can  it  be  expected  that  the  people  will  respect 
and  obey?  That  the  end  to  be  attained  is  good  is  no  excuse. 
History  is  full  of  examples  of  where  the  people  have  applauded 
illegal  acts,  only  later  on  to  find  like  lawlessness  visited  on 
themselves. 

STATE  POWERS  SHOULD  NOT  BE  CURTAILED. 

Assembled  here  in  t'his  great  conference  I  see  presidents  of 
our  greatest  institutions  of  learning,  of  our  immense  railroads, 

86 


of  our  largest  industrial  corporations,  together  with  distin- 
guished men  from  all  walks  of  life,  each  wishing  to  honestly  pre- 
sent from  his  standpoint  a  correct  solution  of  these  problems. 
May  I  ask  you  why  is  there  any  disposition  to  eliminate  the 
States?  Does  it  not  grow  out  of  a  distrust  of  the  people?  There 
is  where  I  think  a  serious  blunder  is  made  in  this  country.  While 
there  are  those  who  have  no  regard  for  the  property  rights  of 
others — who,  having  no  property  of  their  own,  would  tax  to  the 
limit  those  who  have — yet  such  is  not  the  average  man. 

May  I  tell  you  here  to-day — and  I  hope  I  shall  never  have 
occasion  to  have  a  different  opinion  of  mankind — that  I  believe 
the  average  man,  though,  of  course,  more  or  less  selfish,  is 
kindly  disposed  to  his  fellow  man,  loves  his  family,  his  home 
and  his  country,  and  when  called  upon  to  perform  the  duties 
of  citizen,  can  be  relied  on  to  do  what  is  right.  I  heard  the 
president  of  one  of  our  Southern  railroads  recently  in  a  speech 
illustrate  the  benefits  of  trusting  and  having  the  confidence  of 
the  people  of  the  States  through  which  his  road  ran. 

Then  is  it  not  wisdom  not  to  attempt  to  eliminate  the  States? 
Is  it  wise  even  on  the  part  of  the  great  organizations  of  wealth? 
The  accumulation  of  money  is  not  everything.  The  preserva- 
tion of  your  form  of  government  is  more  to  be  desired.  The 
good  will  of  your  fellowman  is  of  greater  value.  Therefore, 
let  us  jealously  guard  the  constitution,  the  granite-like  founda- 
tion of  our  sacred  institutions ;  strengthen,  not  weaken  the 
States,  the  embodiment  of  local  self-government,  the  great  pil- 
lars upholding  the  splendid  structure  of  our  Federal  system ;  so 
that  our  great  Government  may  stand  and  stand  as  the  cen- 
turies pass  by,  the  pride  of  our  own  country  and  the  glory  of 
all  the  world. 

THE  CHAIRMAN :  Gentlemen,  as  the  second  speaker  of  the 
afternoon,  I  have  the  honor  of  presenting  the  Hon.  William  Dud- 
ley Foulke,  of  Indiana,  who  will  speak  upon  "The  Remedies  for 
Monopolies  and  Their  Results." 

Hon.  William  Dudley  Foulke. 

Mr.  Chairman — I  had  expected  to  say  something  at  a  later 
period  in  this  conference,  but  as  it  seems  that  the  programme  this 
afternoon  is  not  quite  as  full  as  it  will  be  at  some  later  days,  I 
have  been  called  upon  now  to  make  up  for  the  shortage  of  to-day. 
I  was  interested  in  the  discussion  this  morning  and  agree  fully 
and  heartily  with  the  president  of  this  conference  in  regard  to  the 

87 


necessity  of  suggesting  such  remedies  as  will  interfere  no  more 
than  possible  with  the  prosperity  of  the  country,  and,  in  the 
main,  with  all  the  propositions  which  he  advanced.  There  was 
one  statement,  however,  that  I  could  not  wholly  endorse,  and 
that  was  the  statement  that  the  mere  size  of  a  corporation 
added  nothing  objectionable.  Size,  of  course,  is  always  a  rela- 
tive question,  and  it  occurred  to  me  while  he  was  speaking,  that 
when  the  Sugar  Trust  controlled,  as  it  did  at  one  time  control, 
98  per  cent,  of  the  entire  output  in  that  line  of  business  in  this 
country,  that  there  was  danger  in  the  mere  size  of  the  corpora- 
tion. Where  size  gives  irresponsible  and  absolute  power  in  the 
fixing  of  prices  and  the  absolute  control  of  business,  that  alone 
has  in  it  the  element  of  danger.  In  regard  to  the  remarks 
made  by  the  learned  Attorney  General  of  Ohio,  in  his  scholarly 
address,  I  agree  most  heartily  in  the  conclusion  that  a  most 
important  step  in  the  doing  away  with  the  monopolies  of  this 
country  would  be  taken  if  the  Federal  Government  could  at 
once  prescribe  that  no  corporation  could  own  the  stock  of 
another  corporation.  I  hope  that  such  a  law  will  be  passed, 
and  that  it  will  be  enforced,  yet,  at  the  same  time,  that  remedy 
alone  would  be  also  ineffectual.  The  ownership  of  the  stock 
of  one  corporation  by  another  has  been  the  means  of  facilitating 
these  aggregations  of  capital  in  the  organization  of  monopoly. 
By  it  they  can  acquire  a  majority  of  stock  easier  than  they 
could  acquire  the  property  of  a  corporation ;  yet  at  the  same 
time  it  would  be  practically  impossible  now,  by  merely  depriv- 
ing one  corporation  of  the  power  to  own  stock  in  another,  to 
take  away  the  power  of  these  great  organizations  and  to  destroy 
their  monopolistic  tendency.  That  was  attempted  in  the  North- 
ern Securities  case,  and  yet  there  the  stock  was  divided  after- 
wards among  the  different  corporations  in  the  same  proportions 
in  which  they  held  in  the  general  company,  and  if  we  were  to 
attempt  to  do  the  same  thing  now  we  would  find  either  one  of 
two  things  would  follow :  Either  the  property  of  these  differ- 
ent, separate  corporations  would  be  sold  to  the  greater  body, 
in  consideration  of  stock  in  the  greater  body ;  or  else  we  would 
find  that  in  the  different  corporations  the  different  controlling 
interests  would  prevail  in  exactly  the  same  proportions  that 
they  prevail  now  in  the  great  combination  of  the  whole  lot 
together.  So  that  we  cannot  break  up  trusts  that  way.  It  will 
do  something.    It  is  valuable,  but  we  cannot  break  up  the  trusts 


or  monopolies,  nor  can  we   control  them  by  merely   such   an 
effort  as  that. 

FEDERAL  COURTS  NOT  VIOLATING  LAW. 

I  did  not  at  all  agree  with  the  gentleman  from  Missouri  in 
his  remarks  in  regard  to  the  tendencies  of  the  Federal  courts. 
He  spoke  of  the  fact  that  at  the  present  time  we  are  all'a  great 
commonwealth,  a  great  republic,  demanding  the  enforcement  of 
the  law.  I  think  that  is  very  true.  And  then  he  proceeded  to 
criticise  the  Federal  courts  because  they  were  violating  the 
laws,  or  preventing  the  States  from  enforcing  the  laws.  We 
must  not  forget  that  the  supreme  law  of  this  nation  is  the 
Constitution  of  the  United  States,  and  the  laws  passed  in  pur- 
suance thereof;  that  the  courts  of  the  United  States  are  estab- 
lished for  the  purpose  of  enforcing  not  only  the  State  laws, 
but  pre-eminently  the  laws  of  that  higher  power  to  which  they 
owe  their  own  existence.  There  would  be  quite  as  great  a 
ground  for  saying  of  the  State  courts,  where  there  is  interfer- 
ence of  authority,  that  they  were  violating  their  higher  duty; 
that  the  State  Legislatures  were  violating  their  duty ;  that  they 
were  violating  their  national  duties — as  to  accuse  the  Federal 
courts  of  violating  the  law  or  preventing  the  enforcement  of 
the  law  Which  they  are  there  to  enforce.  When  the  gentleman 
brought  up  the  simile  of  the  Indian  who  tried  to  throw  his  lasso 
around  the  locomotive,  it  seemed  to  me  that  if  that  simile  had 
a  proper  reference  it  would  be  rather  to  state  that  without 
proper  power  and  authority  we  were  attempting  to  nullify  the 
acts  of  the  United  States  Government. 

NATIONAL   PROBLEMS   REQUIRE   NATIONAL  REMEDIES. 

In  regard  to  the  management  of  these  great  national  trusts, 
born,  perhaps,  of  national  necessities,  certainly  of  national 
exigencies,  exercising  their  power  throughout  the  length  and 
breadth  of  this  land,  if  they  are  ever  to  be  shorn  of  that  power, 
if  that  power  is  ever  to  be  regulated  by  anything  mightier  than 
themselves,  it  will  be  not  by  the  individual  States,  which  for 
the  last  fifteen  years,  have  tried  in  vain  to  curb  the  trusts,  but 
it  will  be  done  through  the  supreme  power  of  the  National  Gov- 
ernment, the  only  power  that  is  fully  capable  of  dealing  with 
this  great  question.  It  is  not  a  question  of  taking  away  State 
rights.     Nobody  wants  to  do  that.     We  realize  the  strength  of 

89 


the  argument  suggested  by  Mr.  Bryan,  that  the  State  being 
upon  the  ground,  having  knowledge  of  local  affairs,  can  be 
much  better  trusted  to  manage  its  local  interests  and  local 
affairs  than  the  National  Government  can.  We  realize,  as  he 
represents  to  us  in  very  strong  language,  that  the  men  of 
Maine  cannot  be  trusted  to  take  care  of  the  interests  of  Texas. 
We  know  that,  but  we  say  that  wherever  an  interest  is  really 
national,  wherever  it  extends  throughout  the  length  and  breadth 
of  this  land  under  the  protection  of  the  National  Constitution, 
the  remedy  must  be  national.  And  we  are  just  as  good  State 
rights  men  who  say  that  as  are  those  that  contend  that  the 
laws  passed  by  the  State  Legislature  must  be  enforced  whether 
the  supreme  rights  of  the  Federal  Government  are  contrary  to 
them  or  not.  In  what  way  shall  the  harmony  of  the  two  be 
preserved?  By  saying  that  all  local  affairs,  all  mere  police 
matters  shall  be  relegated  to  the  States,  and  that  all  national 
commerce  shall,  in  pursuance  to  that  clause  of  the  Constitu- 
tion, which  was  so  clearly  expounded  this  morning,  be  under 
the  control  of  the  National  Government.  And  yet,  I  am  afraid 
that  my  friend  from  Minnesota  went  a  little  too  far  in  saying 
that  what  we  call  intrastate  commerce  is  also  under  the  control 
of  the  National  Government.  Whether  Chief  Justice  Marshall 
was  correct  or  no  in  his  interpretation,  the  authority  of  the 
Supreme  Court  of  the  United  States,  which  has  been  acquiesced 
in  by  so  many  generations,  is  not  likely  to  be  set  aside  to-day, 
and  I  think  we  shall  still  have  to  recognize  the  distinction  be- 
tween interstate  commerce  on  the  one  hand  and  intrastate  com- 
merce on  the  other.  I  believe  we  shall  have  to  acquiesce  in  it 
whether  we  want  to  or  not. 

Now  the  subject  upon  which  I  intended  to  speak  to  you  was 
not  at  all  in  regard  to  the  relative  powers  of  the  States  and  of 
the  National  Government.  The  subject  on  which  I  proposed 
to  speak  to  this  conference  was  the  general  subject,  the  remedies 
for  monopolies  and  their  results. 

GOVERNMENT  POLICY  TOWARDS  TRUSTS. 

In  regard  to  trusts,  there  are  four  courses  for  the  government 
to  pursue — to  leave  them  alone,  to  destroy  them,  to  control  them 
either  by  legislative  regulation,  or  by  actual  ownership  and 
operation. 

When  the  trust  conference  met  here  in  Chicago  seven  years 
ago  there  were  advocates  of  each  of  the  three  plans.    Mr.  Bourke 

90 


Cockran  was  the  leader  of  the  Laisscz  faire  advocates.  He  in- 
sisted that  if  all  special  privileges  given  either  by  the  govern- 
ment, like  the  tariff,  or  by  governmental  agencies,  like  the  rail- 
road rebates,  were  removed,  and  if  competition  were  free,  the 
monopoly  or  trust  which  would  survive  by  reason  of  this  competi- 
tion was  a  good  thing,  not  to  be  interfered  with  or  restrained. 

The  leader  of  the  annihilators  of  the  trust  was  Mr.  Bryan, 
who  held  that  all  monopolies  in  private  hands  were  bad  and 
should  be  utterly  destroyed. 

There  was  a  third  party  of  us  who  believed  that  monopolies 
were  partly  the  result  of  a  natural  industrial  evolution  and 
partly  the  result  of  special  privileges,  and  that  whatever  their 
origin,  they  contained  great  possibilities  for  evil,  yet  that  it  would 
be  hardly  possible  and  not  at  all  desirable  to  annihilate  them,  but 
that  our  governments — both  Federal  and  State — might  regulate 
and  restrain  their  injurious  practices ;  that  "while  we  could  not 
stop  the  Mississippi  by  a  dam,  we  might  conduct  it  into  safer  and 
more  convenient  channels." 

REGULATION  IS  PRACTICABLE. 

At  that  time,  however,  even  the  task  of  regulation  seemed  so 
gigantic  that  many  of  us  doubted  how  successfully  it  could  be 
accomplished.  But,  by  the  blessing  of  a  wise  Providence,  there 
came  to  the  helm  of  this  great  government  of  ours  a  fearless  and 
intrepid  spirit,  with  a  clear  head  and  an  honest  purpose,  who  has 
already  accomplished  the  important  initial  steps  in  this  regulation. 

At  our  conference  seven  years  ago  there  was  only  one  thing 
upon  which  we  were  practically  agreed,  and  that  was  publicity. 
We  believed  that  to  lay  the  doings  of  the  trust  open  to  the  light 
of  day  would  of  itself  afford  a  remedy  for  many  secret  frauds, 
special  favors,  rebates,  over-capitalization,  etc.,  and  that  it  would 
clearly  reveal  the  next  step  to  be  taken  in  the  reform.  And  in 
actual  legislation,  publicity  was  the  first  thing  sought,  and  the 
Department  of  Commerce,  with  its  Bureau  of  Corporations,  was 
established. 

Those  who  had  been  engaged  in  frauds  upon  the  public  at  once 
realized  the  danger,  and  it  was  natural  and  logical  that  telegrams 
from  the  younger  Rockefeller  to  various  influential  members  of 
the  Senate,  when  the  bill  for  this  bureau  was  pending  before  that 
body,  should  have  urged  them  to  oppose  it.  The  result  shows 
why  the  Standard  Oil  Company  did  not  desire  publicity.  We 
know  something  now  about  the  working  of  that,  as  well  as  cer- 

9i 


tain  other  monopolies,  and  the  result  shows,  at  least  in  part,  what 
further  measures  are  necessary — not  only  measures  for  the  re- 
moval of  special  privileges,  but  also. certain  affirmative  regula- 
tions, some  of  which  have  already  been  made,  while  others  are 
now  under  consideration  and  will  be  introduced  in  coming  ses- 
sions of  Congress. 

Meanwhile  the  impulse  given  to  public  sentiment  by  these  rev- 
elations and  reforms  has  been  felt  throughout  the  entire  country 
and  has  led,  in  many  of  our  States,  to  active  legislation  against 
the  railroads  and  the  trusts. 

The  experience  of  the  last  seven  years  would  seem  to  show 
that  the  real  remedy  for  the  trust  is  not  annihilation  or  inaction, 
but  wise  regulation  by  the  government. 

Mr.  Bryan  likened  a  monopoly  to  a  despot.  "There  may  be  a 
despot  who  is  better  than  another  despot,"  he  said,  "but  there  is 
no  good  despotism.  One  trust  may  be  less  harmful  than  another, 
one  trust  magnate  may  be  less  malevolent  than  another,  but  there 
is  no  good  monopoly  in  private  hands."  Mr.  Bryan's  comparison 
of  a  despotism  to  a  monopoly  is  not  an  inapt  one ;  but  if  so,  there 
still  may  be  a  difference  of  opinions  as  to  the  remedy.  Mr. 
Bryan  would  annihilate  the  despot.  More  conservative  reform- 
ers would  control  him  by  constitutional  provisions,  which  would 
render  him  no  longer  a  despot.  In  beleaguering  the  stronghold 
of  monopoly  we  have  quite  different  objects  in  view.  Mr.  Bryan 
would  blow  it  into  the  air  by  dynamite — the  citadel,  the  garrison, 
the  town — regardless  of  the  destruction  which  would  follow.  We 
would  seek  to  reduce  the  stronghold,  capture  it  without  unneces- 
sary destruction,  and  convert  its  resources,  its  wealth,  its  arma- 
ment to  the  common  welfare.  The  statement  of  the  proposition 
is  its  own  argument. 

For  it  must  be  remembered  that  the  trust,  like  the  despot,  is 
potentially,  rather  than  actually,  wicked,  and  while  it  is  proper 
that  the  despot  should  be  restrained,  it  would  not  be  just  that  all 
despots  should  be  annihilated.  The  fact  that  he  had  practically 
unlimited  power  did  not  make  Marcus  Aurelius  a  bad  man, 
though  the  power  and  tendency  of  all  absolute  rulers  to  become 
bad  is  such  as  to  justify  mankind  in  taking  from  all  the  posses- 
sion of  their  absolute  power.  So  it  is  with  the  trusts.  The  great 
American  commonwealth  has  entered  upon  this  wiser  and  safer 
pathway,  and  it  is  to  be  hoped  it  will  continue  therein. 

92 


DRIFT   TOWARDS   MORE   GOVERNMENTAL   REGULATION. 

No  one  can  question  the  drift  toward  greater  governmental 
regulation  of  industrial  activities  everywhere.  The  establish- 
ment and  growth  of  the  Interstate  Commerce  Commission,  the 
rate  bill,  the  Elkins  bill  against  rebates,  the  meat  inspection  bill, 
the  pure- food  bill — all  these  are  steps  in  increasing  the  control 
by  the  Federal  government  of  our  great  agencies  of  production 
and  transportation. 

The  State  governments,  too,  which  have  been  heretofore 
largely  controlled  by  the  railroads  and  other  corporations,  are 
beginning  to  assert  their  own  actual  sovereignty.  They  are  reduc- 
ing rates,  sometimes  quite  arbitrarily  and  perhaps  unjustly;  they 
are  making  additional  requirements,  some  reasonable  and  others 
unreasonable,  for  safety  and  convenience  of  the  public — more 
brakemen  for  each  train,  better  crossings,  additional  connecting 
and  switching  facilities,  the  supplying  of  more  cars,  and  a  hun- 
dred other  things  affecting  intimately  the  management  of  rail- 
road and  other  corporate  property.  The  government  now  largely 
determines  how  much  the  railroad  can  demand  for  the  trans- 
portation of  passengers  or  freight,  and  generally  how  it  shall  con- 
duct its  business.  The  more  intimate  such  control  becomes  (and 
it  is  becoming  more  and  more  complete  every  year),  the  less 
there  remains  to  the  owner  of  the  jus  disponendi,  or  substantial 
right  of  ownership.  It  is  evident  that  when  the  right  of  owner- 
ship thus  gradually  becomes  extinct,  when  you  own  the  property 
and  I  say  what  shall  be  done  with  it  and  how  much  its  use  or  the 
thing  itself  shall  be  worth,  we  have  a  condition  of  unstable 
equilibrium,  and  both  the  railroads  and  the  public  will  finally 
unite  in  a  demand  that  nominal  ownership  shall  be  combined  with 
the  essential  control.  In  other  words,  that  the  government  shall 
finally  own  and  operate  the  roads. 

DIFFICULTIES  OF  REGULATING  RAILWAY  RATES. 

It  is  true  that  under  the  present  system  no  rates  established  by 
the  government  can  be  confiscatory — that  is,  all  government  rates 
must  allow  a  reasonable  profit  for  the  company — but  the  situa- 
tion will  be  clouded  with  infinite  complexities.  The  legislature 
will  establish  a  rate  which  will  allow  a  reasonable  profit  in  a 
prosperous  year,  but  the  next  year  may  not  be  prosperous,  or 
additional  requirements  will  be  imposed  in  extra  cars  that  have 
to  be  furnished,  extra  help  that  has  to  be  employed,  and  loss  will 

93 


y 


ensue.  It  will  be  all  but  impossible  to  say  how  much  of  such 
losses  will  be  due  to  these  legislative  requirements  and  how  much 
to  bad  management.  It  will  be  alleged  on  the  one  hand  and  de- 
nied on  the  other  that  the  business  management  is  inefficient. 
The  two-cent  rate  in  Indiana  may  do  well  to-day,  but  may  bring 
loss  and  disaster  next.  year.  The  courts  will  be  constantly  in- 
voked to  protect  railroad  property  from  confiscation  and  the  pub- 
lic from  overcharges,  until  both  will  be  weary  of  the  struggle  and 
will  demand  that  the  government  shall  own  and  operate  the  road. 
This  result  will  come,  however,  after  many  years.  The  time 
is  not  yet.  It  will  come  as  a  phase  in  the  evolution  of  the  trans- 
portation business  and  it  is  just  as  premature  to  insist  upon  it 
to-day  as  it  was  to  insist  upon  Democratic  equality  for  France 
during  the  first  French  revolution  immediately  after  the  over- 
throw of  the  old  regime.  These  things  follow,  in  social  and 
industrial  life,  the  course  of  nature ;  first  the  blade,  then  the 
ear,  and  after  that  the  full  corn  in  the  ear.  Regulation  is  neces- 
sary to-day  to  do  away  with  the  enormous  abuses  which  exist 
under  the  system  of  discriminating  rates  and  secret  rebates, 
building  up  one  community  or  individual  at  the  expense  of 
others,  and  leading  to  monstrous  injustice! 

GOVERNMENT    OWNERSHIP    OF    RAILROADS    THE    ULTIMATE 

OUTCOME. 

But  regulation  will  itself  lead  to  injustice,  and  the  final  out- 
come will  be  government  ownership  and  operation.  The  acquisi- 
tion of  the  roads  by  the  government  will  also  be  attended  by 
injustice  when  it  comes  to  the  valuation  of  the  property.  The 
present  owners  will  be  pretty  sure  to  receive  either  too  much 
or  too  little  just  as  the  owners  of  the  property  they  condemned 
for  railroad  purposes  very  often,  perhaps  generally,  received 
too  high  a  price  or  too  low  a  price  for  their  property.  But  the 
ownership  of  railroads  by  the  public  is  not  impracticable.  They 
are  owned  and  operated  by  the  government  in  Germany,  and 
they  are  well  operated.  In  some  respects  the  German  railroads 
are  not  so  well  managed  as  our  own,  but  in  other  respects  they 
are  managed  far  better.  Freight  rates  for  long  distances  are 
higher,  but  for  short  distances  and  local  traffic,  they  are  far 
lower ;  while  passenger  rates  on  an  average  are  lower  than 
with  us,  and  the  average  of  security  is  undoubtedly  greater. 
No  one  can  travel  long  upon  German  railways  without  becom- 
ing satisfied  that  the   Government  management  of  these  vast 

94 


agencies  of  commerce  is  not  an  impracticable  dream.  Justice 
between  the  shippers,  between  man  and  man,  and  between  one 
locality  and  another,  has  been  more  perfectly  observed  than 
with  us.  Both  communities  and  individuals  may  be  at  the 
mercy  of  the  government,  but  it  is  better  to  be  at  the  mercy 
of  a  representative  government  than  of  an  irresponsible  corpora- 
tion, whose  chief  aim  is  to  acquire  profits  for  the  officials  and 
stockholders.  The  German  government,  however,  has  reached 
a  point  of  administrative  efficiency  a  good  deal  higher  than  we 
have  attained  to-day.  There  are  parties  and  politics  in  Ger- 
many, but  they  do  not  to  any  great  extent  influence  the  admin- 
istration of  the  railways.  The  civil  service  of  Germany  is  quite 
beyond  political  manipulation.  That  is  becoming  more  and 
more  true  in  America.  We  are  divorcing  our  civil  service  sys- 
tem from  politics  each  year  more  and  more.  There  used  to 
be  a  great  deal  of  politics  in  the  Postoffice  Department,  but 
there  is  far  less  to-day  than  at  any  previous  period  in  our  his- 
tory, and  the  time  is  not  far  distant  when  there  will  be  no  poli- 
tics in  our  postoffice  service.  There  is  still  occasional  corrup- 
tion in  the  public  service,  but  not  nearly  so  much,  I  think,  as  in 
the  private  corporations  engaged  in  the  same  general  kind  of 
business.  The  day  is  undoubtedly  coming  when  the  American 
Government  will  be  just  as  capable  of  managing  its  railroads 
as  the  German  government  is  to-day. 

The  general  trend  of  affairs  in  Europe  is  toward  govern- 
mental ownership.  The  Italian  government  recently  acquired 
control  over  a  great  portion  of  the  Italian  railways.  They  are 
still  badly  managed,  but  the  management  is  no  worse  than  it 
was  before,  and  it  will  grow  better  in  time.  The  service  of  the 
railways  is  a  public  service.  They  acquire  their  roadbed  ancl 
their  property  through  governmental  agency  by  the  law  of 
eminent  domain.  The  control  of  the  State  over  them  is  similat 
to  the  control  of  the  State  over  other  highways.  It  is  a  public 
function,  and  we  are  bound  in  time  to  come  to  the  doctrine 
that  this  function  must  be  exercised  by  the  Government  through 
governmental  agencies,  and  not  through  private  corporations, 
whose  private  interests  are  often  adverse  to  those  of  the  public. 

GAINS  AND  LOSSES  OF  CHANGE  TO  GOVERNMENT  OWNERSHIP. 

We  must  face  the  fact  that  in  the  change  from  private  to 
public  ownership  and  operation,  there  is  bound  to  be  some  loss 
as  well  as  gain.     The  railroad  at  the  present  time  is  in  part  a 

95 


U-" 


monopoly  so  far  as  local  traffic  is  concerned,  indeed  as  to  all 
traffic  except  at  competing  points,  but  this  competitive  traffic 
has  had  the  most  valuable  influence  in  developing  new  methods 
of  cheapening  and  increasing  the  efficiency  of  railroad  service. 
If  the  Government  assumes  the  management  of  railroads  this 
stimulus  afforded  and  required  by  competition  will  be  greatly 
lessened.  It  will  not  be  altogether  eliminated,  for  the  com- 
petition between  the  employees  of  the  State  railroad,  like  the 
competition  between  the  employes  of  our  great  trunk  lines, 
will  continue,  and  lead  to  promotion  and  greater  rewards  to 
those  who  do  their  service  well  over  those  who  perform  their 
duties  perfunctorily  or  badly,  but  there  will  be,  by  no  means,  the 
same  reason  for  that  strenuous  struggle  to  save  every  cent  in 
the  cost  of  transportation  which  now  exists  where  two  great 
systems  compete  with  each  other.  There  will  not  be  the  same 
rapid  advance  in  railroad  improvements  in  the  future  as  there 
has  been  in  the  past  under  the  competitive  system.  The  whole 
problem  is  one  of  balancing  the  advantages  against  the  disad- 
vantages. On  the  one  side  public  ownership,  justice  between  the 
shippers,  greater  steadiness  in  rates,  more  orderly  management 
and  greater  security ;  and  on  the  other  side  greater  energy  in 
the  development  of  new  methods  and  improvements.  '  If  it  were 
a  mere  question  of  how  much  money  could  be  made  by  the 
railroad  service  of  a  country  the  present  competitive  system 
would  be  better  than  governmental  ownership,  but  if  it  be  a 
question,  as  it  is,  of  the  orderly  administration  of  society  at 
large,  and  the  maintenance  of  justice  to  the  entire  community, 
the  governmental  ownership  will  possess  greater  advantages 
over  the  private  ownership  of  railroads.  So  that,  while  Mr. 
Bryan's  proposition  of  the  State  ownership  and  operation  of 
railroads  may  still  be,  and  I  hope  it  is,  a  long  way  off,  yet,  in 
the  more  or  less  distant  future,  it  will  come  by  a  gradual 
process  of  natural  evolution,  and  as  it  comes  the  State  will 
become  more  and  more  able  and  competent  to  administer  the 
trust. 

HOW  SHALL  TRUSTS  BE  REGULATED? 

What  further  measures  of  governmental  regulation  shall  be 
applied  to  the  trusts?  As  to  public  service  trusts,  railroads, 
waterworks,  etc.,  the  power  is  already,  to  a  great  degree,  in  the 
hands  of  the  Government  or  the  municipality.  The  Interstate 
Commerce  Commission  and  the  different  railroad  commissions 

96 


of  the  States,  as  well  as  the  present  State  laws,  can  protect  the 
public  from  oppression.  But  this  is  not  true  in  respect  to 
industrial  corporations  like  the  Standard  Oil  Company.  Even 
if  rebates  are  prevented,  other  forms  of  oppression  in  the  shape 
of  exorbitant  and  preferential  charges,  taxing  one  country,  one 
State,  or  one  section,  for  the  benefit  of  another,  still  contnne. 
The  freight  rates  of  the  railroads  may  now  be  uniform,  but  the 
Standard  can  charge  a  high  enough  price  on  lubricating  oil  to 
get  an  enormous  rebate,  from  the  roads  that  handle  its  traffic, 
enough  to  crush  all  competitors  and  yet  not  violate  the  law. 
There  must  be  more  complete  relief  than  the  mere  suppression 
of  rebates  and  other  special  privileges.  What  must  that  relief 
be?  Shall  it  be  Mr.  Bryan's  annihilation?  How  shall  we  anni- 
hilate? Shall  we  dissolve  the  corporation  and  leave  its  original 
elements  to  combine  again  in  subtler  forms?  That  was  once 
tried  with  the  Standard  Oil — how  did  it  work?  You  cannot 
utterly  annihilate  without  forfeiture  of  the  property.  Are  we 
prepared  to  take  the  pathway  of  general  confiscation  with  its 
following  of  informers  and  wreckers,  its  common  ruin  of  the 
innocent  with  the  guilty,  and  its  destruction  of  all  business 
prosperity? 

While  Mr.  Bryan  proposed  in  one  breath  that  monopolies 
should  be  annihilated,  in  another  he  suggested  that  the  law 
limit  the  percentage  of  the  total  product  of  the  trade  which  each 
corporation  might  control,  and  he  adds  "Experience  would 
determine  what  that  proportion  would  be  of  experience."  This 
method  would  be  as  difficult  as  to  annihilate  the  entire  concern, 
perhaps  more  so,  since  the  trust  is  still  to  retain  enough  power 
to  thwart  the  efforts  of  the  government;  and  the  men  inter- 
ested in  the  monopoly,  their  wives,  sons,  cousins,  friends,  any- 
body you  like,  could  soon  establish  a  "competing  organization" 
to  produce  and  control  the  rest  of  the  output.  This  remedy 
will  not  do. 

ACTUAL    MONOPOLIES    SHOULD    BE    SO   DECLARED   AND   SUB- 
JECTED TO  REGULATION. 

What  I  propose  is  something  more  simple.  Whenever  a 
corporation  is  accused  of  exercising  monopolistic  powers  j^nd 
injuriously  controlling  rates,  driving  competitors  out  of  the 
market  by  arbitrary  reductions,  preferring  one  set  of  customers 
to  another,  or  one  section  of  the  community  to  another,  and 
so  far  suppressing  competition  that  it  can  maintain  its  unjust 

97 


rates  and  discriminations,  acting,  in  other  words,  oppressively 
both  to  rivals  and  to  the  community,  as  the  Standard  Oil  Com- 
pany is  acting  to-day,  then  let  a  suit  be  brought  in  the  Federal 
Court.  Let  the  object  of  that  suit  be,  not  to  dissolve  the  cor- 
poration, which  is  useless,  or  to  annihilate  it  and  confiscate  its 
property,  which  is  ruinous,  but  let  the  purpose  be  two-fold, 
both  to  punish  the  guilty  individuals  who  have  committed  the 
acts  of  oppression,  by  both  fine  and  imprisonment,  and,  most 
important  of  all,  to  declare  the  corporation  a  monopoly  and 
to  subject  it  for  that  reason  to  the  same  government  control 
as  to  rates,  prices,  purchases,  sales,  reports  and  general  con- 
duct, as  railways  and  other  public  service  corporations  are 
to-day,  nay  more,  to  the  stricter  and  more  thoroughgoing 
authority,  to  which  these  public  service  corporations  are,  as  I 
believe,  soon  to  be  subjected.  The  time  has  come  to  amend 
the  Sherman  law  so  as  to  make  the  object  of  that  law  a  far 
more  thoroughgoing  government  control  than  at  present  of  the 
corporations  who  have  acted  in  restraint  of  trade. 

We  do  not  need  to  take  this  remedy  as  to  all  corporations. 
Where  competition  is  free,  competition  is  still  the  best  fixer  of 
prices  and  regulator  of  conduct,  but  where  competition  is  stifled, 
where  we  have  monopoly,  the  power  to  fix  arbitrarily  the  prices 
of  labor  and  commodities,  there  that  power  must  be  limited  by 
law  and  by  administrative  control,  joist  as  in  the  case  of  the 
so-called  natural  monopolies,  like  street  railways,  waterworks 
companies,  etc.  Indeed  the  distinction  between  these  natural 
monopolies  and  other  kinds  of  monopoly  is  often  extremely 
shadowy.  If  a  street  railway  be  a  natural  monopoly  so,  only 
in  a  less  degree,  is  a  general  railroad  line.  If  a  telephone  is  a 
natural  monopoly  because  the  duplication  of  the  plant  is  not 
only  an  unnecessary  expense,  but  actually  lessens  the  usefulness 
of  the  company  by  dividing  up  the  subscribers,  this  is  true, 
although  in  less  degree,  of  nearly  every  kind  of  business  that 
is  transacted  in  a  city.  There  is  an  immense  waste  when  sixty 
grocery  wagons  are  employed  to  make  the  deliveries  that  might 
be  done  by  two  or  three.  There  is  an  injury  to  the  consumer 
when  a  dozen  competing  merchants  have  to  reduplicate  their 
advertisements,  offering  the  same  class  of  goods  and  have  to 
employ  the  great  corps  of  traveling  salesmen  to  present  the 
respective  merits  of  their  wares.  The  methods  of  competition 
everywhere  are  enormously  wasteful,  although  where  it  is  free 
there  is  a  great  gain  in  the  stimulus  which  it  gives  to  industrial 

98 


activity  and  the  constant  improvement  of  methods  of  produc- 
tion and  distribution.  Therefore  let  it  thrive  where  it  is  free, 
and  let  it  be  subject  to  control  whenever  it  becomes  a  monopoly. 

WHAT  CONSTITUTES  MONOPOLY? 

But  how  will  you  define  a  monopoly?  You  do  not  need  to 
define  it,  let  the  courts  do  that  from  actual  cases  when  they 
arise,  in  the  same  way  that  they  define  fraud.  Courts  have 
refused  to  make  a  specific  definition  of  fraud  because  if  they 
did  so  some  one  would  find  a  way  to  defraud  the  definition.  Let 
the  conduct  prohibited  be  the  same  conduct  as  that  forbidden 
by  the  Sherman  act,  let  it  be  conduct  "in  restraint  of  trade." 
That  has  often  been  passed  upon  and  there  is  no  great  difficulty 
in  construing  it. 

But  if  you  must  have  a  further  and  more  definite  description 
of  a  monopoly,  Mr.  Bryan's  definition  is  not  a  bad  one — it  is 
"a  corporation  which  by  itself,  or  in  conjunction  with  others, 
controls  a  sufficient  proportion  of  the'  article  produced  or 
handles  to  enable  it  approximately  (I  would  say  'substantially'), 
to  determine  the  terms  and  conditions  of  sale  or  purchase,"  and 
I  would  add,  "and  which  uses  such  control  for  the  oppression  of 
its  competitors,  or  of  the  public.  But  you  say,  these  things 
will  lead  to  Socialism.  Government  control  will  lead  more  and 
more  to  government  ownership  and  operation,  and  finally  we 
shall  have  the  Government  owning  and  operating  all  the  in- 
dustries of  the  country.  Undoubtedly  they  do  lead  in  that  direc- 
tion, but  the  tendency  toward  Socialism  is  caused,  not  so  much 
by  the  assumption  of  Government  control,  as  by  the  organiza- 
tion and  conduct  of  these  immense  industries  which  threaten  to 
monopolize  and  place  in  the  hands  of  a  few  men  the  bulk  of  the 
whole  industry  of  our  country.  That  is  the  origin  of  the  drift 
toward  Socialism.  Government  control  is  putting  on  the  brakes 
in  a  train  which  would  be  otherwise  hastening  toward  an  in- 
evitable collision. 

GOVERNMENT  OWNERSHIP   SHOULD   BE   POSTPONED. 

Government  control  is  wisely  putting  off  the  day  for  govern- 
ment ownership  and  operation,  which  would  otherwise  be  very 
near  us,  putting  it  off  until  a  time  when  the  State  itself  shall  be 
far  better  equipped  and  qualified  than  now  to  assume  the  duties 
which  may  be  found  to  be  inevitable,  so  that  whatever  change 

go 


may  come,  will  come  as  a  healthful,  peaceful  and  natural  evolu- 
tion rather  than  as  the  result  of  a  gigantic  struggle  of  the 
masses  against  the  arbitrary  power  and  injustice  of  the  few,  a 
struggle  which  would  lay  in  the  dust  not  merely  the  prosperity, 
but  the  peace  and  happiness  of  that  which  is  to-day  the  most 
prosperous,  the  greatest  and  the  happiest  nation  in  the  world. 

THE  CHAIRMAN :     As  the  next  speaker   the  chair  has  the 
pleasure  of   presenting   Mr.   Theodore  Marburg,   of   Maryland, 
who  will  speak  on  "Governmental  Regulation." 
Mr.  Theodore  Marburg. 

Mr.  Chairman — This  paper  is  not  another  Pandora's  box  of 
suggestions  about  how  to  hurry  along  the  vivisection  of  corpora- 
tions in  which  the  Federal  and  State  governments  are  indulging. 
It  aims  rather  to  weigh  the  problems  yet  again,  to  place  an  esti- 
mate on  existing  practices  and  old  suggestions,  with  a  view  to 
helping  just  a  little  to  a  clearer  perception  of  values.  A  problem 
is  never  so  simple  as  when  it  is  first  approached.  Reflection  is 
largely  a  voyage  of  discovery — the  discovery  that  the  simple  is 
complex.  The  program  of  this  conference  indicates  that  we  are 
here  to  aid  this  process  of  differentiation.  Social  institutions 
may  be  studied  without  taking  away  their  life.  They  manifest 
themselves  in  acts,  and  we  are  not  forced  to  cut  them  up  to  get 
at  an  adequate  knowledge  of  them. 

The  radical  treatment  of  corporations  we  are  witnessing 
involves  injustice — injustice  to  the  captains  and  grave  injustice 
to  the  stockholders  who  have  been  invited  to  invest  under  exist- 
ing laws.  If  our  conduct  has  any  moral  aim — and  in  which  of 
our  acts  can  we  free  ourselves  from  moral  obligation? — this  be- 
comes very  serious,  because  in  its  ultimate  result  the  practice  of 
justice  has  a  more  far-reaching  effect  than  any  economic  ad- 
vantage can  possibly  have.  It  affects  character,  the  upbuilding 
of  which  is  the  greatest  of  all  human  causes.  We  are  bound  to 
consider  not  only  whether  a  proposed  measure  will  accomplish 
an  end  truly  desirable,  but  whether  it  accomplishes  it  at  too  great 
a  cost;  whether  in  our  triumphant  march  we  are  not  trampling  and 
bruising  the  higher  and  more  permanent  interests  of  men.  "Let 
justice  be  done  though  the  heavens  fall"  is  only  another  way  of 
saying  that  the  practice  or  failure  of  justice  makes  or  unmakes 
a  race. 


100 


GOVERNMENT  ACTION  CHECKS  IMPROVEMENT  OF  RAILWAYS. 

The  new  powers  given  to  the  Interstate  Commerce  Com- 
mission actually  to  fix  rates,  and  the  reduction  of  railroad  charges 
by  the  State  legislatures — undoubtedly  stimulated  by  Federal 
example — are,  at  this  particular  time,  both  inexpedient  and  im- 
moral— inexpedient  because  the  railroads  for  some  years  to  come 
should  be  left  highly  profitable  with  a  view  to  being  compelled 
by  law  to  use  profits  more  largely  in  betterment  of  the  service; 
immoral  because  justice  to  the  private  stockholder  is  being  de- 
nied. Let  our  legislators  see  that  where  there  is  a  single  track 
to-day  a  double  track  be  laid,  that  existing  double  tracks  grow  to 
four,  that  grade  crossings  be  abolished,  cars  multiplied,  terminal 
facilities  increased,  that  the  penalty  of  men's  stupidity  in  living 
in  such  numbers  under  the  insufferable  conditions  that  prevail 
in  our  great  cities  be  somewhat  lessened  by  compelling  the  rail- 
roads to  suppress  smoke  in  passing  through  the  cities,  and,  above 
all,  that  the  hours  of  the  employes  be  not  too  long,  so  that  they 
may  give  efficient  service  and  stop  the  sacrifice  of  life  on  rail- 
ways. To  compel  the  railways  to  do  these  things  is  to  compel 
them  to  benefit  themselves  and  involves  no  injustice  to  the  stock- 
holder. The  present  mad  attack  on  earnings  only  postpones  the 
day  of  improvements — improvements  which  the  public  need  far 
more  than  they  need  a  reduction  in  charges.  I  do  not  think  we 
realize  yet  how  serious  this  step  of  the  Federal  and  State  govern- 
ments is.  The  great  fall  in  the  value  of  railway  shares  in  Eng- 
land   during   the    past   ten    years*    is    traceable    directly   to   the 

♦YEARLY    DIVIDENDS   AND    PRICES    FEBRUARY    1ST,    OF    EACH   YEAR. 

1893     1899     1900     1901     1902     1903     1904     1905     1906     1907 

ralorlAnian  {Dividend    %..      5  4%       4  4  4  3%       3%       4  3% 

Caledonian »  p^    %  ,  /; , .  1G0       156       141       130       126       115       104       112       119       102  % 

Prftat    Fastern        (Dividend    %..      3%        3%        3  3  3%        3%        3%        3%        3% 

Gicat   eastern.,    j  p^    % l2QlA   122       123       107       105         94 %     87 %     89         87%     79% 

Great    Northern     dividend    %..      2%        1%        0  0  %        1  1  1%        1% 

i.ieai    Aortncm.  ^  p^    % 5314     G-.^,     5Gi4     4314     4;.         42%     3^     39         4G         44 % 

Great   Western       (Dividend    %..      3%       5%       4%       4%       5%       5%       5%       5%       5% 
wreac  western..  7prioe    % 17g      1G7%  1G7      14Gi/2  140      138      137      141       142       130% 

Lancashire  &         J  Dividend    %..      5%  5%       4%       3%  4           3%       3%  3%       4% 

Yorkshire .  }  Price    % 14S  V2  151  %  145       131  113  108         96  108  %  109       104  \ 2 

London.  Brighton  J  Dividend    %..      6%  6%       4%       3%  4%       4%       5%  5%       5 

&  South  Coast.    }  Price    % 17Sy2  176%  171       133V2  126  128       105%  128%  130       116 

London  &              (Dividend    %..      7%  ~7V8       6%       5%  6           5%       5%  6%       6% 

Northwestern .    }  Price    % 204%  203%  197       179  170  168       152  153  V2  161       153 

London*           "(Dividend    %..      6%  6%       6y8       0%  6           6           6  6           5% 

Southwestern..     Price    % 232  222 %  208       190  174  174       155  160  161       153 

Midland                   (Dividend    %..      3%  3%       2%       2%  2%       2%       2%  2%       2% 

qian(t ?  Price    % 93  93%     81         75%  75         73         68%  6S%  69%     66 

North   Eastern..  $  Dividend    %••,-<[%   7J%   If%   ,J>%       *%       p       -r.%       5%       6%~ 

?  Price    % 179       1S1  '1    175       169%   155%   147       i:t9%    139       145",    145% 

IOI 


power  to  fix  rates  placed  in  the  hands  of  the  Board  of  Trade,  a 
conservative  body  of  practical  men  in  one  of  the  most  conserva- 
tive countries  in  the  world — conservative  in  the  best  sense.  The 
English  railroads  now  find  themselves  confronted  with  the  ne- 
cessity of  making  extensive  improvements,  including  the  relaying 
of  track,  with  no  visible  resources  for  the  undertaking.  A  solu- 
tion must  be  reached,  and  will  no  doubt  be  reached  by  the  Board 
of  Trade  easing  the  thumbscrews,  no  matter  what  popular  clamor 
such  a  course  evokes.  The  consequences  of  discouraging  rail- 
road improvements  must  be  more  serious  in  America  than  it  has 
been  in  England,  for  the  reason  that  England  had  her  mileage 
and  adequate  trackage  built  when  this  practice  of  attacking  earn- 
ings began. 

DANGERS  OF  LOWER  CHARGES. 

During  the  past  year  the  most  serious  attack  on  railways  came 
from  the  separate  States,  but  it  is  the  new  powers  conferred  on 
the  Interstate  Commerce  Commission  from  which  we  really  have 
most  to  fear.  The  cry  of  the  public  is  always  for  lower  charges. 
Let  this  cry  come  up  from  all  parts  of  the  country  to  this  small 
body  of  men  through  a  series  of  years  and  what  hope  is  there 
that  they  will  succeed  in  withstanding  it?  The  separate  States 
are  likewise  setting  up  commissions  with  power  to  fix  charges  of 
public  service  corporations,  paralleling  the  action  of  certain  cities 
in  substituting  government  by  commission  for  the  representative 
system.  It  may  be  urged  that  the  action  of  the  Wisconsin  Rail- 
road Commission  and  the  Virginia  Corporation  Commission  has 
been  more  conservative  than  the  action  of  many  State  legisla- 
tures; that  the  Galveston  Commission  has  saved  that  city  much 
money,  etc.  But  these  bodies  are  young,  and  new  institutions, 
because  of  the  interest  they  excite  and  the  importance  of  in- 
augurating them  properly  always  enlist  the  services  of  better 
men  than  can  be  induced  to  serve  the  cause  later  on.  This  was 
as  true  of  the  establishment  of  Central  Park  in  New  York  City 
as  of  the  inauguration  of  American  government  in  the  Philippines. 

PUBLIC  OPINION   MORE   POTENT  THAN  LAW. 

Our  present  tendency  to  cast  about  for  new  devices  in  govern- 
ment instead  of  centering  our  attention  upon  the  betterment  of 
the  personnel  under  existing  institutions  is  regrettable.  To  de- 
prive ourselves  of  the  advantages  of  the  deliberative  assembly, 

102 


whether  in  cities  under  the  Galveston  plan,  which  is  spreading, 
or  under  government  by  commission  in  important  fields  of  State 
or  national  jurisdiction,  is  to  ignore  the  teachings  of  history. 
The  united  thinking  of  the  many,  when  opinion  is  informed,  is 
superior  to  that  of  individuals.  The  people  as  a  whole,  after  a 
campaign — newspaper  or  political — are  sounder  than  the  legis- 
lative assembly,  and  in  the  long  run  the  assembly  after  discus- 
sion is  sounder  than  a  commission.  On  the  majority  of  subjects 
which  call  for  legislation  there  can  be  no  campaign  of  educa- 
tion because  the  subjects  are  too  numerous  and  the  needed  action 
too  urgent;  therefore  the  system  of  representation,  which  is  one 
of  the  greatest  political  institutions  men  have  ever  devised.  Must 
we  recall  anew  the  reflection,  so  often  made  before,  that  benevo- 
lent despotism  has  its  advantages,  but  who  can  promise  that  the 
despotism  once  established  shall  continue  benevolent?  The  gov- 
erning commission,  it  is  said,  is  amenable  to  public  opinion  and 
removable  at  the  will  of  the  people.  But  that  is  to  make  it  every- 
body's business  to  watch  and  control  it,  and  proverbially  what  is 
everybody's  business  is  nobody's  business.  There  is  a  growing 
power  of  the  people  to  choose  between  contending  leaders  and 
conflicting  ideas.  That  choice  is  best  expressed  in  the  long  run 
through  the  instrumentality  of  the  deliberative  assembly,  and  to 
fly  now  in  the  direction  of  direct  democracy  (the  referendum), 
now  to  its  opposite,  autocracy,  is  the  play  of  the  child  with  a  ball 
and  rubber  string — the  rebound  is  inevitable.  The  most  useful 
powers  to  confer  on  a  commission  are  powers  such  as  the  Federal 
Bureau  of  Corporation  enjoys — powers  of  investigation,  includ- 
ing the  power  to  summon  witnesses.  If  the  facts  of  an  abuse 
are  laid  bare  public  opinion  is  apt  to  impose  a  remedy — if  not  by 
its  own  sheer  force,  then  by  means  of  the  legislative  assembly. 
Perhaps  we  can  afford  the  experiment  of  allowing  commissions 
to  regulate  the  conduct  of  corporations.  My  plea  is  that  for  the 
present  they  be  not  authorized,  either  in  State  or  nation,  to  fix 
prices.  Though  the  interests  of  corporations  and  of  the  public 
touch  at  many  points  they  are  not  identical,  and  State  interfer- 
ence is  therefore  justified.  But  State  interference  may 
be  stupid  and  harmful  as  well  as  valuable  beyond  all 
calculation.  Such  big  results  follow  the  acts  of  government  in 
a  great  country — the  welfare  of  so  many  people  is  affected — that 
the  process  of  a  gradual  unfolding  in  preference  to  abrupt  and 
violent  change  becomes  a  cardinal  principle  in  politics.  We  are 
in  danger  of  becoming  an  emotional  people.     It  is  daily  more 

103 


apparent  that  wc  stand  in  particular  need  of  self-imposed  limita- 
tions on  our  action — and  self-imposed  laws  are  the  very  essence 
of  liberty.  When  in  onr  calmer  moments  we  set  up  constitutional 
limitations,  or  phrase  anew  the  canons  of  conduct,  including  the 
value  of  justice,  we  are  throwing  out  anchors  to  windward  which 
may  save  us  from  disaster. 

MORE   DESIRABLE   TO    REGULATE  THAN   TO  RUIN. 

Since  the  first  Chicago  conference  on  trusts  we  have  had  some 
years  of  practical  experience  and  experiment  accompanied  by 
academic  discussion.  The  present  conference  is  in  a  position  to 
consider  this  data  and  elicit  from  it  certain  governing  principles — 
principles  in  the  light  of  which  present  problems  may  stand  out 
more  clearly  and  future  developments,  as  they  arise,  may  drop 
more  readily  into  place  and  reveal  their  true  relations  and  sig- 
nificance. The  value  of  the  corporate  form  for  big  enterprises  is 
so  fully  realized  by  everybody  that  it  need  not  be  dwelt  upon. 
We  may  likewise  take  it  as  an  accepted  fact  that  what  is  known 
as  the  industrial  trust  has  so  many  advantages  from  the  stand- 
point of  economy  of  production  that  it  is  more  desirable  to  regu- 
late it  than  to  ruin  it.  Again,  we  have  come  to  accept  the  pub- 
lic service  corporation  as  in  its  nature  a  monopoly,  i.  e.,  operating 
in  a  field  and  under  conditions  where  it  is  very  difficult  to  estab- 
lish other  than  temporary  competition. 

EVILS  OF  COMBINATIONS. 

Our  first  step,  then,  is  to  get  clearly  in  mind  the  evils  con- 
nected with  these  otherwise  useful  institutions.  The  corporate 
form  itself  makes  possible  the  evils  of  dishonest  promotion, 
including  over-capitalization,  misleading  financial  statements 
and  dishonest  management.  The  magnitude  of  the  interests 
that  can  be  assembled  in  corporate  form  invites  corruption  of 
the  Legislatures  by  reason  of  the  prize  at  stake.  Abuses  com- 
mon alike  to  the  public  service  corporation  and  the  industrial 
trust  are :  discrimination  and  excessive  gains  made  possible  by 
monopoly.  It  is  the  element  of  monopoly  likewise  which  per- 
mits the  abuses  peculiar  to  each ;  to  the  public  service  corpora- 
tion inadequate  service  and  lack  of  progress,  and  to  the  indus- 
trial trust  unfair  methods,  inferior  quality  of  product  and  de- 
pressing the  price  of  the  raw  material. 

The  evils  that  characterize  the  corporate  form,  over-capitaliza- 

104 


tion,  etc.,  may  be  dealt  with  by  requiring-  that  capitalization  be 
limited  to  actual  value  paid  in  and  by  publicity.  We  have  ex- 
amples of  the  successful  operation  of  such  laws. 

MAINTAIN  INDUSTRIAL  "OPEN  DOOR." 

Discrimination  on  the  part  of  the  railroads,  being  severely 
penalized  under  the  present  laws,  must  soon  disappear.  Its 
practice  by  industrial  trusts  is  the  principal  weapon  in  their 
armory  of  monopoly.  If  discrimination  be  suppressed,  the  re- 
maining abuses  of  trusts  will  largely  disappear;  the  abuse  of 
excessive  price,  unfair  methods  (such  as  binding  a  prospective 
purchaser  to  deal  only  with  the  trust),  inferior  quality  of 
product  and  depressing  the  price  of  raw  material.  Compelling 
the  trusts  by  law  to  sell  at  one  price  to  all  comers  at  the  factory 
door,  just  as  railroads  are  compelled  to  serve  the  public  to-day 
at  uniform  charges,  would  effectually  stop  discrimination.  It 
would  re-establish  the  industrial  "open  door"  through  which 
the  potential  competitor  may  enter.  Monopoly  resting  on  gov- 
ernment favor,  such  as  a  patent  or  franchise,  and  monopoly 
intrenched  in  control  of  the  supply  of  the  raw  material,  would 
alone  remain  to  be  dealt  with.  All  others  could  maintain 
themselves  only  as  "monopolies  of  excellence."  The  chief  aim 
of  legislation  designed  to  cure  the  evils  of  industrial  trusts 
should,  therefore,  be  to  maintain  the  industrial  "open  door,"  to 
safe-guard  the  potential  competitor. 

TO   OBTAIN   BETTER   SERVICE. 

In  inadequate  service  lies  the  chief  shortcomings  of  the  public 
service  corporation.  Improvement  in  the  quality  of  the  service 
should  be  the  main  object  of  legislation  affecting  them.  The 
questions  of  the  cost  of  the  service  and  the  public  revenue 
should  both  be  subordinated  to  it.  Included  in  the  topic  of 
inadequate  service  is  the  serious  question  of  the  partial  crip- 
pling, or  entire  stoppage,  of  the  service  by  strikes.  If  it  be 
difficult  or  undesirable  to  adopt  compulsory  arbitration  as  a 
remedy,  we  should  at  least  apply  to  public  service  corporations 
compulsory  investigation,  which  has  been  shown  to  promote  so 
materially  the  settlement  of  disputes. 

In  seeking  from  the  public  service  corporation  an  adequate 
return  for  the  valuable  privileges  granted,  it  is  important -to 
avoid  any  system  of  taxation  which  will  discourage  enterprise. 

105 


Among  the  many  plans  followed,  one  which  has  commended 
itself  for  some  years  to  students  of  public  questions,  and  is 
followed  successfully  in  connection  with  such  different  institu- 
tions as  the  Imperial  Bank  of  Germany  and  the  elevated  rail- 
ways of  Boston,  is  that  under  which  profits  above  a  given  rate 
are  divided  equally  by  the  public  treasury  and  the  corporation 
taxed.  Under  this  plan  ample  incentive  is  left  to  enterprise, 
and  the  effect  on  the  sovereign  body  is  conservative,  since  it 
realizes  that  if  the  cost  of  the  service  be  reduced  by  statute  or 
decree,  half  the  loss  will  fall  on  the  public  treasury. 

LIMITS  OF  GOVERNMENT  OPERATION. 

When  we  come  to  the  question  of  the  means  by  which  these 
ends  may  be  attained,  we  find  them  to  differ  widely,  according 
to  the  problem  presented.  If  there  is  lack  of  progress  in  the 
conduct  of  the  telegraph  and  express  service,  if  inventions  are 
suppressed,  if  the  service  is  poor  and  the  charge  excessive,  why 
not  government  operation?  The  machinery  is  already  provided 
in  the  existing  postoffice  system.  In  country  offices  the  post- 
master himself,  and  in  cities  a  subordinate,  becomes  the  opera- 
tor. For  small  packages  in  both  town  and  country  the  postman 
is  the  expressman,  and  for  more  bulky  packages  the  railroads 
are  required  to  institute  a  system  of  collections  and  deliveries 
and  quick  service  identical  with  the  present  express  service.  It 
would  not  be  so  difficult  to  install  the  telephone  with  automatic 
switchboards  in  the  local  postoffice. 

But  the  moment  we  attempt  to  dispose  of  other  public  service 
corporations  in  this  summary  way,  we  are  confronted  with  an 
insuperable  objection,  the  objection  to  adding  their  army  of 
employes  to  the  existing  body  of  public  servants.  The  economic 
aspect  of  the  question — the  fact  that  government  operation  is 
apt  to  be  more  wasteful — is  dwarfed  in  comparison  with  the 
political  danger  of  adding  1,300,000  railway  employes  alone  to  the 
Government  service.  And  what  about  the  street  railways,  with 
their  140,000  employes?  Once  transferred,  it  is  likely  that  these 
growing  services  will  continue  to  be  operated  by  the  nation  or 
city.  Abuses  practiced  by  some  other  industry — such  as  the 
mining  of  coal — would  precipitate  a  demand  for  its  absorption 
by  the  State,  and  we  would  be  saddled  for  all  time  with  a 
swarming  bureaucracy  who  would  gradually  come  to  look  upon 
public  office  as  an  hereditary  right  to  be  handed  on  to  their 

106 


children,  as  in  France  and  Germany  to-day.  Such  a  bureaucracy 
would  sap  the  life  of  the  Republic  and  constitute  a  menace  to  it. 

What  we  require  then,  in  the  case  of  the  majority  of  public 
service  corporations,  as  well  as  of  industrial  trusts,  is  not  absorp- 
tion by  the  State,  and  not  direct  control  of  charges,  but  control 
of  conduct,  which  embraces  the  matters  of  questionable  practices 
and  of  the  quality  of  the  service. 

It  remains  to  consider  how  best  to  effect  this  control  of 
conduct. 

NATIONAL  CONTROL  ESSENTIAL. 

The  separate  States  have  proved  themselves  inadequate  to 
the  task.  Improved  communication  has  caused  industry  and 
commerce  to  leap  State  bounds  and  to  become  national.  It 
follows  that  they  can  be  controlled  successfully  only  by  the 
Federal  and  not  by  the  State  governments.  Model  incorpora- 
tion laws  in  the  few  States  in  which  they  exist  only  serve  to 
drive  corporations  elsewhere  for  a  charter,  which  charter  im- 
mediately privileges  them  to  operate  in  every  other  State,  includ- 
ing the  home  State.  It  is  only  by  denying  permission  to  do 
interstate  commerce  to  corporations  which  fail  to  conform  to 
definite  Federal  requirements  that  the  problem  can  be  solved. 
The  respective  merits  of  Federal  incorporation  and  Federal 
license  there  remains  no  time  for  me  to  discuss.  I  may  be  per- 
mitted, however,  the  single  observation  that  certain  advantages 
seem  to  lie  with  the  system  of  Federal  license,  because  it  is  not 
certain  that  a  State  would  be  compelled  to  grant  to  a  corpora- 
tion holding  a  Federal  charter  permission  to  manufacture  within 
its  borders.  Under  the  license  plan,  corporations  would  take 
out  State  charters  subject  to  much  of  the  control  hitherto  exer- 
cised by  the  State,  but  would  be  estopped  from  interstate  com- 
merce if  they  failed  to  obtain  a  Federal  license  and  to  conform 
to  the  practices  as  a  condition  of  which  the  license  is  granted. 

The  following  paper,  on  "Uniform  Federal  and  State  Control 
Over  Interstate  Matters,"  presented  to  the  conference  by  Mr. 
Charles  F.  Ziebold,  President  of  the  West  End  Business  Men's 
Association  of  St.  Louis,  Mo.,  was  then  read  by  title : 
Mr.  Charles  F.  Ziebold. 

Mr.  Chairman — Speaking  on  behalf  and  in  the  name  of  the 
members  of  our  association,  I  wish  to  say  that  we  believe  that 
uniform  Federal  and  State  control  over  interstate  matters  has 

107 


v/1 


become  absolutely  necessary  and  essential  to  their  intelligent, 
impartial  and  advantageous  regulation.  And  in  order  to  attain 
a  proper  basis  for  the  establishment  of  such  uniformity  we  must 
go  back  to  first  principles,  those  underlying,  fundamental  prin- 
ciples that  were  called  into  requisition  when  our  existing  dual 
system  of  Federal  and  State  government  was  originally  estab- 
lished. And  by  examining  those  principles  in  the  light  of  the 
racial,  domestic,  social,  commercial  and  industrial  conditions  as 
they  exist  to-day,  we  must  determine  whether  such  principles 
are  still  in  harmony  with  our  latter  day  conditions,  and  are  still 
the  proper  basis  on  which  to  found  the  extent  and  apportion- 
ment of  power  and  authority  between  the  United  States  and  the 
several  States,  under  our  dual  system  of  government. 

OUR  REPUBLIC  AT  OUTSET  A  MERE  LEAGUE. 

These  first,  or  basic  principles,  on  which  was  builded  the  Re- 
public, and  by  which  was  established  the  division  of  power  be- 
tween the  United  States  and  the  several  States,  are  found  in  the 
original  Articles  of  Confederation,  adopted  by  the  delegates  of 
the  United  States  of  America  in  Congress  assembled  on  the  15th 
day  of  November,  1777.  And  it  is  evident  that  the  United  States 
of  America,  as  then  established,  was  intended  to  be  a  confed- 
eracy only,  a  mere  central  body,  with  certain  limited  powers  con- 
ferred upon  it  by  a  number  of  independent  sovereignties,  and 
not  a  union,  a  central,  integral  and  supreme  sovereignty,  com- 
posed of  lesser  territorial,  political  and  legislative  subdivisions, 
whose  several  rights  of  sovereignty  were  equal  as  among  them- 
selves, but  subordinate  as  to  the  central  body. 

And  this  distinction  was  kept  alive  in  the  Constitution  of  the 
United  States  subsequently  adopted  on  the  17th  day  of  Septem- 
ber, 1787,  and  in  the  several  amendments  thereto  adopted  there- 
after. 

That  the  idea  of  establishing  a  Confederacy  and  not  a  Union, 
of  forming  merely  a  central  body  for  the  purposes  of  an  offen- 
sive and  defensive  alliance  between  various  separate  and  inde- 
pendent sovereignties,  and  not  a  coherent,  supreme  and  perma- 
nent central  government  or  sovereignty,  is  evidenced  by  the 
language  of  Articles  1,  2  and  3  of  the  Articles  of  Confederation 
of  1777,  which  read: 

article  1. 

"The  style  of  this  Confederacy  shall  be  'The  United  States  of 
America.' 

108 


ARTICLE    2. 

"Each  State  retains  its  sovereignty,  freedom  and  independ- 
ence, and  every  power,  jurisdiction  and  right  which  is  not  1>> 
this  Confederation  expressly  delegated  to  the  United  States,  in 
Congress  assembled. 

ARTICLE    3. 

"The  said  States  hereby  severally  enter  into  a  firm  league  of 
friendship  with  each  other  for  their  common  defence,  the  se- 
curity of  their  mutual  and  general  welfare,  binding  themselves 
to  assist  each  other  against  all  force  offered  to,  or  attacks  made 
upon  them,  or  any  part  of  them,  on  account  of  religion,  sover- 
eignty, trade  or  any  other  pretence  whatever." 

Could  language  more  clearly  express  the  self-evident  fact  that 
the  real  intention  of  the  Articles  of  Confederation  was  merely 
to  form  a  mutual  compact  between  separate  and  independent 
sovereignties  or  nations,  and  not  to  create  a  new  and  central  sov- 
ereignty or  nation,  composed  of  the  several  separate  and  com- 
pacting sovereignties  as  its  subordinates? 

In  other  words,  that  which  was  originally  created  by  the 
Articles  of  Confederation  was,  in  principle,  no  more  or  less  than 
that  which  will  eventually  be  created  if  the  purposes  and  objects 
of  the  Hague  Peace  Tribunal  should  ultimately  become  realized. 

THE  SAME   IDEA  UNDERLIES  WORDS   OF  THE   CONSTITUTION. 

This  theory  of  the  preservation  of  the  component  parts  of  the 
Confederation  as  independent  and  separate  sovereignties  was 
adopted  because  the  then  Confederating  States  were  originally 
colonies,  organized  under  charter  rights  granted  by  different 
foreign  governments  and  sovereigns,  and  enjoying  varying  rights 
and  powers,  according  to  the  provisions  of  the  creating  grants. 
And  these  colonies,  whose  peoples  differed  radically  in  nation- 
ality and  political  and  religious  belief,  were,  therefore,  extremely 
jealous  of  their  various  rights  of  independent  sovereignty  and  in- 
tolerant of  the  possibility  of  outside  interference,  by  the  Con- 
federation, in  their  internal  affairs. 

And  this  original  theory  has  been  brought  down  to  us 
through  the  flight  of  years,  and  forms  the  basis  for  the  present 
assertion  of  the  principle  of  our  so-called  "State  rights." 

But  the  theory  alone  now  remains  to  us,  because  the  evolution 
of  developing  conditions  has  radically  changed  the  facts  on 
which  the  theory  was  based,  and  we  are  to-day,  not  a  mere  Con- 
federation of  independent  sovereignties  for  purposes  of  offensive 

109 


and  defensive  alliance,  but  a  compact,  integral  nation,  a  Consti- 
tutional Union,  composed  of  various  lesser  political  subdivisions 
known  as  States,  whose  inhabitants  are  one  people,  recognizing 
one  central,  supreme  legal  and  constitutional  authority,  com- 
posed of  themselves  and  created  by  themselves. 

Why,  then,  should  there  exist  this  constant  jealousy  and  fear 
of  the  people  of  our  several  States  of  themselves  as  the  people 
of  the  United  States?  Why  should  their  own  power  and  author- 
ity as  a  people  of  the  United  States  over  themselves  as  a  people 
of  the  several  States  be  regarded  in  the  unfriendly  and  fearsome 
spirit  of  hostility  and  antagonism  usually  accorded  the  attempted 
encroachments  of  a  foreign  nation  and  power. 

THEORIES  AND  CONDITIONS   HAVE  DIVERGED. 

The  unalterable  fact  is,  that  the  original  theory  of  our  dual 
system  of  government,  and  the  existing  conditions,  as  developed 
in  the  flow  of  years,  have  travelled  in  opposite  directions,  and 
our  only  present  alternative  is  to  harmonize  the  widely  divergent 
theory  and  conditions  by  conforming  the  theory  to  the  existing 
conditions  or  causing  the  existing  conditions  to  meet  the  orig- 
inal theory.  The  former  alternative  would  be  proper,  logical, 
safe  and  possible,  and  the  latter  is  physically  and  legally  impos- 
sible; impossible,  because  we  are  as  much  the  creatures  of  en- 
vironment collectively  as  a  nation  as  we  are  separately  as  in- 
dividuals, and  the  environment  of  our  present  domestic,  social, 
commercial  and  industrial  conditions  is  the  will  and  wish  of  the 
people  (developed  by  the  evolution  of  changing  needs  and  cir- 
cumstances), embodied  into  an  unwritten  law  of  daily  habit  and 
practice  superior  to  and  beyond  the  mere  written  law,  legislative 
or  constitutional. 

And  to  conform  this  original  theory  to  the  existing  conditions 
would  necessitate  a  radical  change  in  the  relation  now  obtaining 
between  the  United  States  and  the  several  States ;  a  change  that 
would  substantially  establish  the  same  legislative  and  constitu- 
tional relation  between  the  United  States  and  the  several  Slates 
as  now  obtains  between  those  States  and  their  respective  coun- 
ties and  cities. 

NEW    CONDITIONS    DEMAND    A    NEW    DISTRIBUTION    OF    AU- 
THORITY. 

We  realize  that  in  the  eyes  of  many  persons  this  suggestion 
will  appear  as  an  unpardonable  and  destructive  sacrilege,  a  ruth- 

no 


less  and  thoughtless  attack  upon  the  inspired  and  infallible  wis- 
dom and  foresight  of  our  revered  forefathers.  Nevertheless,  the 
fact  remains  that  they,  able  and  astute  as  they  were,  but  builded 
on  conditions  as  they  then  existed,  and  could  not  anticipate  con- 
ditions as  they  now  exist.  They  could  not  know  that  rapid 
transit,  rural  delivery,  the  telephone,  the  telegraph  and  other 
modern  facilities  for  widespread  and  convenient  transportation 
and  communication  would  practically  resolve  all  our  more  gen- 
eral domestic,  social,  commercial  and  industrial  activities  into 
interstate  enterprises,  which  would  require  for  their  legitimate 
and  profitable  existence  and  development  uniformity  of  Federal 
and  State  control  and  regulation. 

If  we  should  have  national  coinage,  bankruptcy,  naturaliza- 
tion, postal  regulation  and  other  like  laws,  because  conditions 
seemed  to  render  them  advisable  and  expedient,  why  not  na- 
tional negotiable  instrument,  receivership  and  assignment,  elec- 
tion, telephone,  telegraph,  railroad,  interstate  street  railway, 
marriage  and  divorce  and  other  like  regulation  laws,  when  ex- 
isting conditions  seem  to  render  them  similarly  advisable  and 
expedient? 

That  there  should  be  uniformity  of  Federal  and  State  control 
over  these  matters  is  scarcely  debatable,  and  that  the  present 
method  of  attempted  dual  regulation  is  clumsy  and  inadequate 
is  evidenced  by  the  continual  friction,  cropping  out  between 
State  and  nation  in  our. courts  and  elsewhere.  Because  of  which 
we  daily  witness  the  colossal  folly  of  the  people  of  the  several 
States  quarrelling  and  contending  with  themselves  as  the  people 
of  the  United  States,  as  if,  as  a  people  of  the*  several  States  they 
were  one  nation,  and  as  a  people  of  the  United  States  a  different 
and  hostile  nation.  True  it  is  that  the  traffic  or  activity  which 
is  confined  to  any  one  State  should  be  under  the  control  of  that 
State ;  but  for  the  same  reason  the  moment  it  expands  itself  into 
another  State  it  should  be,  for  the  sake  of  uniformity,  under  the 
control  of  the  United  States. 

But  under  the  present  system  of  operating  railroads,  who  can 
say  when  their  traffic  is  State  and  when  interstate,  without  be- 
coming involved  in  the  endless  confusion  of  practical  details? 
Who  will  say  that  the  idea  of  a  marriage,  or  divorce  being  legal 
in  one  State  and  illegal  in  another  is  not  repugnant  and  intoler- 
able? 

Who  will  say  that  the  old-time  characteristic  antagonisms  and 
differences  of  habits  and  belief  of  our  people,  racial,  religious, 

in 


political,  social,  commercial  and  industrial,  nurtured  by  the  en- 
forced isolation  of  those  times,  have  not  largely,  if  not  entirely, 
disappeared  in  consequence  of  modern  improved  conveniences 
that  have  practically  eliminated  distance  and  annihiliated  time? 
In  those  days,  when  conveniences  for  rapid  transit  and  communi- 
cation were  lacking,  when  education  was  less  general  than  now, 
when  news  travelled  slowly,  when  newspapers  were  scarce,  and 
when,  because  of  such  isolation,  concerted  action  by  the  people 
at  large  was  difficult,  and  communities  were  compelled  to  rely 
upon  themselves  more  or  less,  it  may  have  been  well  for  such 
communities  by  States  to  be  jealous  and  fearsome  of  any  out- 
side encroachment  of  authority  or  interference.  But  conditions 
are  radically  different  to-day,  and  the  inhabitants  of  the  most 
widely  separated  sections  of  our  country  are  now  nearer  neigh- 
bors: than  were  the  residents  of  adjoining  States  less  than  fifty 
years  ago.  Uniformity  of  control  by  nation  and  State  thus  be- 
comes the  keynote  for  the  solution  of  the  many  vexing  railroad 
rate,  trust  and  interstate  traffic  regulation  problems,  and  the 
other  like  problems  created  by  the  gradual  nationalizing  of  our 
social  and  domestic  life  and  commercial  and  industrial  enter- 
prises. 

NATIONAL    POWER    SHOULD    BE    COMMENSURATE    WITH    NA- 
TIONAL NEEDS. 

To  determine  the  character  and  degree  of  this  uniformity  we 
should  take  stock  of  ourselves  as  a  nation,  and  broadly  fix  upon 
what  shall  be  deemed  interstate  and  what  intra-state  business 
and  traffic,  and  then'  permit  nation  and  State  each  to  be  supreme 
in  its  own  field  of  activity.  Man  cannot  have  two  masters  in 
reference  to  the  same  subject  matter  without  suffering  the 
palsy  of  confusion  and  uncertainty  engendered  by  such  an  at- 
tempted dual  control. 

And  if  it  is  desired  to  properly  apportion  our  powers  of  gov- 
ernment between  nation  and  State,  such  apportionment  must  be 
founded  on  the  universally  accepted  rule  that  the  rights  of  the 
few  are  subservient  to  the  rights  of  the  many,  or,  more  definitely 
stated,  that  the  separate  rights  of  each  person  are  subject  to  the 
collective  rights  of  all  persons.  This  rule  found  its  first  expres- 
sion in  the  so-called  social  compact,  the  beginning  of  all  organ- 
ized government  and  society. 

Thus  the  State  is  the  supreme  authority  over  the  county  and 
city,  the  county  and  city  over  the  township  and  ward,  and  the 

112 


township  and  ward  over  the  precinct.  Power  travels  down  from 
the  larger  body  to  the  smaller,  not  up  from  the  smaller  to  the 
larger.  Excepting  only  in  the  relation  between  the  States  and 
the  United  States,  the  States  continue  to  insist  upon  the  reversal 
of  the  rule,  and  contend  that  in  this  particular  instance  power 
travels  up  from  the  smaller  to  the  greater  body ;  that  is,  up  from 
the  State  to  the  nation,  and  not  down  from  the  nation  to  the 
State.  The  logic  of  events  and  the  necessities  of  existing  condi- 
tions now  demand  the  adoption  of  the  general  rule  as  between 
nation  and  State,  and  that  the  States  be  placed  in  substantially 
the  same  relation  to  the  United  States  as  our  counties  and  cities 
now  occupy  in  respect  to  their  several  States. 

This  is  revolutionary,  but  every  pronounced  departure  from 
the  established  order  of  things  is  revolutionary. 

And  this  will  be  a  revolution  of  peace,  out  of  which  will  event- 
ually arise  increased  harmony,  confidence  and  good  will  between 
nation  and  State. 

Nor  need  there  be  fear  of  a  centralized  monarchy,  because 
there  is  nothing  to  fear  even  from  a  monarchy,  when  the  people 
themselves  are  the  monarch. 

And  now  more  than  ever  are  the  people  to  be  trusted,  because 
now  more  than  ever  do  they  understand  their  rights  and  the 
reason  for  their  being  and  having  government. 

CENTRALIZATION  NOT  TO  BE   FEARED. 

It  will  only  be  necessary  to  lodge  a  broader  and  more  con- 
venient mastery  in  the  people  themselves,  instead  of  in  their 
representatives,  legislative  and  judicial,  in  order  to  fortify  each 
of  us  individually,  and  each  of  our  lesser  political  subdivisions, 
against  the  much-feared  and  oft-predicted  exactions  of  an  in- 
creased centralized  power.  What  the  people  themselves  ordain 
is  what  the  people  want,  and  is  that  to  which  they  are  entitled. 
Nor  should  it  be  possible  for  a  mere  handful  of  their  representa- 
tives, legislative  or  judicial,  to  thwart  their  wishes  or  nullify 
their  action.  The  unreasonable  extent  to  which  the  exercise  of 
this  delegated  power  may  be  abused  is  exemplified  almost  daily 
by  the  action  of  our  various  legislative  agents,  who  foist  upon 
us  laws  we  do  not  want  and  deny  us  laws  we  do  want ;  and,  with- 
out voicing  any  opinion  whatever  upon  the  merits  or  demerits 
of  the  question,  we  may  illustrate  the  ridiculous  length  to  which 
our  judicial  one-man  power  may  be  carried  by  referring  to  the 

113 


disposition  made  some  years  ago  of  the  income  tax  law,  when 
one  man  by  a  change  of  mind  over  night  set  at  naught,  upon  the 
ground  of  unconstitutionality,  the  will  of  our  eighty-odd  mill- 
ions of  people  as  expressed  by  themselves  by  their  ballots  and 
by  the  action  of  their  representatives  in  Congress. 

Whether  it  would  not  be  wise  to  curtail  the  jurisdiction  of  our 
courts  in  respect  to  the  controversies  involving  merely  the  ques- 
tion of  the  constitutionality  of  a  law,  and  permit  its  constitu- 
tionality or  unconstitutionality  to  be  determined,  under  proper 
safeguards,  by  the  people  themselves,  is  a  matter  worthy  of  our 
best  thought  and  most  serious  consideration.  As  it  is,  the  many 
make  the  laws,  but  the  few  unmake  them. 

It  is  because  of  these  various  reflections  that  the  members  of 
our  association  deemed  the  time  auspicious  for  a  general  dis- 
cussion and  consideration  of  the  questions  involved  in  the  re- 
peated and  irritating  controversies  now  transpiring  between  na- 
tion and  State  in  respect  to  their  relative  priority  of  right  and 
superiority  of  control  over  matters  interstate,  and  which  con- 
troversies have  become  intensified  and  complicated  by  reason  of 
the  fact  that  many  things  that  may  not  be  interstate  under  the 
strict  letter  of  the  law  are  none  the  less  interstate  by  the  sheer 
force  of  existing  circumstances  and  conditions. 

And  we  believe  that  the  discussion  of  these  questions  in  an 
unofficial  joint  National  and  State  Convention,  called  by  the 
President  of  the  United  States  and  the  Governors  of  the  several 
States,  would  compel  the  widest  attention  and  be  productive  of 
the  best  and  speediest  results;  and  we  accordingly  adopted  a 
resolution  to  that  effect  some  months  ago  and  forwarded  copies 
of  same  to  the  President  and  all  the  Governors. 

And  we  venture  to  hope  that  one  of  the  practical  results  of 
this  convention  will  be  the  adoption  of  some  substantially  similar 
resolution,  and  herewith  respectfully  submit  for  your  considera- 
tion the  draft  of  a  resolution  which  we  further  hope  may  meet 
with  your  approval. 

THE  CHAIRMAN :  The  report  of  the  Committee  on  Rules, 
Order  of  Business  and  Permanent  Organization  will  now  be  pre- 
sented by  the  chairman  of  the  committee,  Mr.  Frank  A.  Faxon, 
of  Missouri. 

Mr.  Faxon  thereupon  read  the  report  of  the  Committee  on 
Organization,  which  follows: 

114 


The  delegates  on  the  registry  list  prepared  and  handed  in  by 
the  National  Civic  Federation  shall  constitute  the  official  list  of 
delegates  of  the  convention. 

No  proxy  shall  be  accepted. 

Delegates  shall  be  entitled  to  one  vote  only,  even  when  repre- 
senting more  than  one  organization,  and  such  vote  shall  not  be 
considered  binding  on  the  organization  represented  unless  for- 
mally endorsed  by  said  organization. 

All  voting  shall  be  viva-voce,  or  by  rising  vote,  and  all  reso- 
lutions shall  be  carried  only  by  a  two-thirds  majority  of  dele- 
gates voting  at  a  regular  session  of  the  conference. 

It  is  recommended  that  a  committee  of  five  shall  be  appointed 
to  take  charge  of  the  programme  of  the  convention.  Said  com- 
mittee to  consist  of  the  following  members: 

Messrs.  Tompkins,  Easley,  O'Connell,  Marks  and  Reynolds. 

A  committee  of  resolutions  shall  be  appointed  by  the  perma- 
nent chairman  of  the  convention,  to  consist  of  one  delegate 
from  each  State  and  Territory,  who  shall  be  elected  by  the 
delegates  from  such  State  or  Territory. 

Fifteen  additional  members  of  the  committee  on  resolutions 
shall  be  appointed  by  the  permanent  chairman  of  the  confer- 
ence. 

The  committee  recommends  the  appointment  of  the  following 
permanent  officers  of  the  conference : 

President — Nicholas  Murray  Butler,  New  York. 

Vice-Presidents — Samuel  Gompers,  New  York ;  Nahum  J. 
Bachelder,  New  Hampshire;  David  R.  Forgan,  Illinois;  C.  P. 
Y\  albridge,  Missouri;  D.  A.  Tompkins,  North  Carolina;  George 
Langford,  Oregon;  Brooks  Adams,  Massachusetts. 

Permanent  Secretary — James  B.  Reynolds,  New  York. 

Assistant  Secretaries — Henry  Wallace,  Des  Moines,  Iowa; 
Dell  Keizer,  Topeka,  Kansas;  Hal  H.  Smith,  Detroit,  Mich. 

Speakers  from  the  floor  shall  be  limited  to  five  minutes,  and 
shall  speak  only  once  on  the  same  subject. 

All  resolutions  shall  be  submitted  in  writing,  and  shall  be 
referred  without  discussion  to  the  committee  on  resolutions.  A 
finance  committee  shall  be  appointed  by  the  chairman  of  the 
conference  to  raise  the  necessary  funds  to  cover  the  expenses 
of  the  convention. 

Respectfully  submitted   by  the  committee  on  organization, 
FRANK  A.  FAXON,  Chairman. 
JAMES  B.  REYNOLDS,  Secretary. 

115 


THE  CHAIRMAN:  The  report  is  before  the  conference  for 
consideration  and  discussion. 

A  DELEGATE :  I  would  like  to  ask  one  question.  The 
report  says  that  all  resolutions  shall  go  to  the  committee  without 
discussion.  Does  that  also  mean  that  they  shall  go  to  the  com- 
mittee without  reading  before  the  conference? 

MR.  FAXON:  No.  I  think  the  intention  was  that  the  com- 
mittee was  to  have  them  read  and  referred  to  the  committee  on 
resolutions. 

Upon  motion,  the  report  of  the  committee  was  adopted. 

THE  CHAIRMAN:  The  report  of  the  committee  being- 
adopted,  the  rules  therein  provided,  and  the  officers  therein 
named  become  the  rules  and  officers  of  this  conference.  What 
is  the  further  pleasure  of  the  conference? 

A  delegate  then  moved  that  the  meeting  adjourn,  and  the 
motion  was  seconded. 

MR.  SAMUEL  GOMPERS:  Mr.  Chairman,  a  motion  has 
been  made  that  we  adjourn  for  the  afternoon  session.  It  is  just 
about  twenty  minutes  after  four,  and  the  thought  has  occurred  to 
me  that  some  delegates  may  care  to  take  advantage  of  the  five- 
minute  rule  to  discuss  some  matters  that  they  may  have  in  mind. 
There  are  quite  a  number  of  us  who  are  not  expected  to  read 
formal  papers  or  to  make  formal  addresses,  and  more  than  likely 
a  five  minutes'  address  on  the  part  of  some  delegates  to  this 
conference  might  be  profitable  to  us  all,  and  I  would  suggest, 
without  making  a  motion,  that  the  motion  already  offered  be 
withdrawn,  and  that  we  proceed  under  the  five-minute  rule  to 
have  some  delegates  address  this  conference. 

Motion  seconded. 

THE  CHAIRMAN:  Does  the  chair  understand  that  the 
motion  to  adjourn  is  withdrawn?  There  being  no  objection,  the 
motion  to  adjourn  is  withdrawn  and  the  meeting  is  in  the  hands 
of  the  conference  in  accordance  writh  the  rules  already  adopted. 

(Mr.  Gompers  was  then  called  for  by  a  number  of  delegates.) 

116 


MR.  GOMPERS:     I  made  that  suggestion  in  the  interesl  of 

those  not  clown  on  the  list  to  make  formal  addresses. 

MR.  EUGENE  E.  TRUSSING :  Mr.  Chairman,  a  paper 
this  morning  dealt  with  the  control  of  the  holding  corporations 
in  States  in  which  the  minor  or  subsidiary  corporations  which 
they  controlled  were  domiciled,  and  it  was  suggested  that  the 
holding  corporations  were  beyond  the  control  of  the  States 
which  objected  to  their  activity,  because  the  mere  holding  of 
stock  in  a  local  corporation  had  been  decided  not  to  be  the 
doing  of  business  in  the  State  in  which  that  corporation  was 
located.  The  Gas  Trust  case  was  cited  in  the  course  of  the 
paper,  and  I  was  reminded  of  how  the  Gas  Trust  case  came 
to  an  end.  That  does  not  appear  in  the  Supreme  Court  of 
Illinois  decision.  After  the  case  was  returned  to  the  Circuit 
Court,  the  case  was  delayed  somewhat  in  the  hearing,  and  it 
turned  out  finally  that  the  Chicago  Gas  Trust  Company's  stock- 
holders had  transferred  all  their  stock  to  a  Philadelphia  Trust 
Company  to  act  as  a  holding  company.  This  was  before  hold- 
ing companies  had  become  very  common,  and  that  company 
voted  the  stock,  held  it  in  trust,  received  the  dividends,  issued 
its  certificates  to  the  stockholders  and  paid  with  its  checks  the 
moneys  it  received,  and  in  that  way  the  benefit  of  the  Supreme 
Court's  decision  seemed  to  be  lost.  We  had  an  active  attorney 
general  at  that  time,  and  I  think  he  filed  a  bill — I  don't  remem- 
ber the  pleadings  exactly,  but  I  think  he  filed  a  bill  to  wind  up 
all  the  gas  companies  underlying,  for  the  reason  that  they  were 
contrary  to  the  policy  of  the  State  of  Illinois,  owned  by  a  for- 
eign corporation,  with  powTers  not  justified  by  our  law ;  and  he 
moved  the  court  immediately  for  a  temporary  injunction  pre- 
venting the  underlying  Illinois  corporations  from  paying  any 
dividends  to  the  foreign  holding  company.  That  injunction 
was  immediately  allowed,  and  the  Chicago  Gas  Trust  case  was 
won.  The  stockholders  immediately  authorized  their  counsel 
to  agree  to  most  anything,  and  the  Chicago  Gas  Trust  Com- 
pany's stockholders  agreed  finally  to  a  decree  by  which  that 
company  was  dissolved;  the  underlying  companies  resumed 
business,  not  only  in  the  gas  business,  but  in  the  Legislature, 
and  there  they  won  their  case,  but  the  appeal  to  the  courts  was 
successful.  It  was  made  by  the  Attorney  General,  or  in  his 
name,  and  it  has  never  been  disputed  as  to  its  effectiveness.  It 
can  be  done  every  day.  The  Attorney  General  can  go  into 
court  at  any  time,  just  as  the  King  could  go  into  chancery  if 

117 


his  corporations  misbehaved.  So  that  the  remedy  against  the 
holding  company  is  very  simple — simply  to  enjoin  the  under- 
lying company  from  paying  dividends  to  the  holding  company. 

MR.  VOGEL  (Wisconsin):  Mr.  Chairman,  I  do  not  know 
whether  the  Attorney  General  of  Ohio  is  still  present.  Refer- 
ence was  made  this  morning  to  a  kindred,  and  at  the  same  time 
a  non-competing  company.  It  seems  to  me  there  is  such  a 
thing.  We  all  know  there  are  a  great  many  industries  which 
produce  by-products  which  are  of  themselves  of  very  little 
value,  not  of  sufficient  value  to  create  or  enable  an  individual 
manufacturer  to  work  them  into  a.  finished  product.  This 
necessitates  a  separate  organization  which  will  handle  the  by- 
prodiicts,  and  such  organizations  exist  in  a  great  many  different 
lines  of  trade.  For  instance,  when  the  hair  is  taken  off  of  the 
hides,  and  the  individual  tanner  does  not  have  sufficient  market 
to  handle  the  product  very  successfully,  it  is  handled  by  other 
corporations.  The  stock  of  this  company  is  held  by  the  various 
men  interested  in  the  trade.  I  would  call  that  a  kindred  cor- 
poration, and  yet  not  a  competitive  corporation.  If  the  Attorney 
General  of  Ohio  is  present  I  would  like  to  hear  what  he  has 
to  say  in  regard  to  that? 

MR.  CHAIRMAN :  Is  the  Attorney  General  of  Ohio  in  the 
room? 

HON.  WADE  H.  ELLIS:  Mr.  President,  I  am  not  a  dele- 
gate to  the  convention,  and  therefore  feel  some  hesitation  about 
addressing  the  chair.  I  was  invited  here  to  perform  a  par- 
ticular duty,  and  having  performed  that  I  do  not  know  that  I 
have  any  further  legal  standing  in  this  body. 

THE  CHAIRMAN :  This  is  not  necessarily  competitive, 
although  a  kindred  duty. 

MR.  ELLIS:  If  there  is  no  objection  I  should  be  glad  to 
answer  the  question  that  has  just  been  put.  In  Ohio,  at  the 
time  a  recent  law  was  passed  imposing  certain  obligations  upon 
all  corporations  except  public  service  corporations  and  a  cer- 
tain method  was  devised  for  taxing  public  service  corporations, 
a  sort  of  subterfuge  was  inaugurated  by  which,  in  return  for 
the  corporate  acquiescence  in  those  laws,  this  kindred  and  non- 
competing  law  was  passed.  It  was  a  sort  of  dicker  on  the  part 
of  the  General  Assembly  with  the  corporations  that  were  affect- 
ed by  the  new  taxing  law.  I  said  in  my  remarks  this  morning 
that  there  had  been  no  judicial  determination  of  what  was  meant 
by  kindred  and  non-competing  corporations.     That  statute  is 

118 


being  used  constantly  in  our  State  to  effect — to  bring  about — 
combinations  that  otherwise  could  not  be  produced  at  all.  In 
the  case  cited  there  is  not  any  reason  that  I  can  think  of  why 
a  corporation  intending  to  go  into  the  business  of  manufactur- 
ing a  by-product  should  not  do  so  directly,  honestly,  openly  in 
its  own  name.  A  corporation  has  the  incidental  right  to  go 
into  any  naturally  related  business;  and  the  courts  have  held 
that  where  the  business  it  proposes  to  go  into  is  a  related  busi- 
ness the  corporate  power  exists  in  the  corporation  to  pursue  that 
business  as  incidental  to  its  express  powers. 

The  thing  that  I  have  been  contending  against  is  this  business 
of  corporations  not  only  doing  their  own  business,  but  buying 
the  stock  of  other  corporations  for  the  purpose  of  indirectly 
effecting,  under  lawful  methods,  a  combination  that  could  not 
legally  be  effected  if  it  were  not  for  this  device.  Now  it  is 
true,  perhaps,  that  the  State  might  prevent  its  own  corporation? 
from  being  controlled,  as  the  gentleman  from  Chicago  has  sug- 
gested. In  the  State  of  Ohio  to-day  there  are  four  or  five  sub- 
sidiary Standard  Oil  companies,  every  dollar  of  whose  stock — 
or  at  least  the  majority  of  whose  stock — is  owned  by  the  Stand- 
ard Oil  Company  of  New  Jersey,  and  I  am  to-day  asserting  in 
the  courts  of  Ohio  the  proposition  that  it  is  in  violation  of  our 
law  that  an  Ohio  corporation  permits  its  stock,  not  to  be 
owned,  because  that  cannot  be  prevented,  but  to  be  voted  and 
have  dividends  upon  it  determined  by  a  foreign  corporation. 
But  a  moment's  reflection  shows  how,  if  that  were  the  only 
remedy  of  the  States,  incalculable  confusion  and  conflict  would 
exist  all  over  the  country.  One  corporation  would  be  author- 
ized by  an  Eastern  State  to  buy  stock  of  all  corporations  of 
that  character,  and  it  would  be  denied  in  the  State  where  it 
intended  to  do  business.  As  to  the  proposition  that  the  cor- 
poration is  not  doing  business  in  the  State  where  it  owns  stock 
in  another  corporation,  I  cite  the  gentleman  to  the  case  of  the 
Standard  Oil  Company  v.  Commonwealth — I  think  it  is  in  the 
H2th  Pennsylvania,  in  which  the  court  held  directly  that  the 
State  of  Pennsylvania  was  powerless  to  prevent  a  foreign  cor- 
poration from  owning  the  stock  of  domestic  corporations  in  the 
State  of  Pennsylvania. 

Why  temporize  with  this  method  when,  by  a  simple  return 
to  the  old  common  law  principle  that  no  corporation  shall  have 
the  power  to  own  the  stock  of  another  corporation,  the  States 
will  be  protected  by  the  Federal  Government  from  the  absorp- 

119 


tion  of  their  corporations  by  the  corporations  of  other  States 
which  have  broken  away  from  the  old  common  law  principle? 
Can  anybody  complain?  The  sole  limit  upon  their  power,  giv- 
ing them  all  the  right  to  do  all  the  business  they  please,  to 
amass  all  the  wealth  they  may,  to  make  all  the  money  they 
want  to — the  only  limitation  upon  their  power  is  that  they  shall 
attend  strictly  to  their  own  business. 

THE  CHAIRMAN:  What  is  the  further  pleasure  of  the 
conference? 

MR.  EASLEY:  The  various  delegates  from  the  States  are 
requested  to  at  once  elect  their  members  of  the  committee  on 
resolutions  and  report  them  to  the  secretary  of  the  convention 
to-night,  if  possible.  The  delegates  from  any  State  include  those 
appointed  by  the  Governor  and  other  bodies. 

Thereupon,  on  motion,  the  conference  was  adjourned  until 
8:15  o'clock  p.  m. 


120 


Third  Session,  October  22,  8:15  P.  M. 

The  third  session  of  the  conference  was  called  to  order  at 
8:15  p.  m.  by  Mr.  D.  A.  Tompkins. 

THE  CHAIRMAN:  It  is  now  more  than  fifty  years  since  a 
young  man  left  this  country  to  go  to  the  Orient  to  establish  a 
business,  and  he  made  there  for  himself  and  his  associates  a 
good  name,  and  gave  America  a  good  name  also  by  his  fair 
dealing  and  liberal  thought.  I  am  going  to  introduce  to  you 
to-night  a  direct  descendant  of  that  merchant,  and  one  who  pre- 
serves the  liberality  of  his  thought.  Mr.  Seth  Low  will  address 
you  upon  the  subject  of  "The  National  Control  of  Railways." 
Hon.  Seth  Low. 

Mr.  Chairman — After  listening  to  the  very  interesting  legal 
discussion  this  morning,  I  realize  even  better  than  I  did  when  I 
was  writing  my  paper  how  presumptuous  it  is  for  a  man  to  dis- 
cuss questions  about  which  he  knows  so  little,  and  yet  public 
opinion,  which  is  entitled  to  pass  upon  these  questions,  is  largely 
lay  opinion,  and,  therefore,  the  views  of  a  layman  who  is  simply 
trying  to  think  straight  on  a  question  of  national  importance  may 
not  be  without  their  value. 

LESSENED   COMMAND   OF   RAILWAYS   OVER   CAPITAL. 

The  railroad  situation  in  the  United  States  at  the  present  time 
deserves  the  most  earnest  consideration.  The  movement  of 
merchandise  has  outstripped  present  facilities,  and  the  railroads 
would  like  to  enlarge,  but  they  find  it  difficult  to  get  the  neces- 
sary money.  The  public  wants  the  railroads  to  enlarge,  but  it 
will  not  furnish  the  money.  Ordinarily,  the  promise  of  a  good 
return  on  the  investment  would  secure  ample  funds.  Why  is 
it  that,  in  a  time  of  great  commercial  activity,  the  funds  are 
not  forthcoming?  Doubtless  there  are  many  reasons,  and  one 
of  the  most  evident  is  that  so  much  money  is  needed  that  it  is 
hard  to  get  enough.  But  back  of  all  this  there  lie  two  influ- 
ences which  certainly  have  to  be  reckoned  with.  The  plain  man 
understands   that   business    enterprises   and   good    service     are 

121 


entitled  to  fair  earnings.  What  he  does  not  understand  is  in 
what  respect  railroad  business  so  far  differs  from  any  other 
business  that  those  upon  the  inside  can  honestly  and  honorably 
become  multi-millionaires,  while  those  upon  the  outside  so 
often  find  themselves  the  owners  of  worthless  stock.  He  ob- 
serves that  the  directors  of  savings  banks  do  not  become  rich 
in  that  way.  He  suspects,  therefore,  that  the  many  millions  of 
the  few  have,  in  many  cases,  been  made  at  the  expense  of  those 
for  whom  these  few  have  been  trustees.  He  thinks  that  there 
has  been  in  railroad  boards  of  direction  a  widespread  loss  of 
the  sense  of  trusteeship,  and  he  is  more  and  more  coming  to 
demand  of  railroad  directors  the  same  sort  of  self-abnegation 
that  the  law  demands  of  a  private  trustee  as  towards  his  ward. 
The  law  allows  a  trustee  reasonable  compensation,  but  it  does 
not  allow  the  personal  enrichment  of  the  trustee  at  the  expense 
of  the  ward.  It  is  true  that  railroad  directors  and  railroad 
stockholders  buy  and  sell  upon  an  open  market.  But  whenever 
a  director  buys  or  sells  upon  private  information  obtained  by  him 
as  a  director  the  question  must  arise  in  the  domain  of  conscience, 
Would  his  stockholder  sell  or  buy  if  he  had  the  same  information? 
That,  in  my  judgment,  is  the  sort  of  feeling  that  underlies  a  great 
deal  of  the  criticism  of  high  finance ;  the  feeling  that  the  invest- 
ing public — not  the  inside  few,  but  the  outside  many — are 
entitled  to  the  same  sort  of  protection  from  the  law  that  the 
law  gives  as  towards  trustees  for  individuals.  Hence  the  demand 
for  Government  control  on  the  side  of  railroad  financiering. 

RAILROADS  ARE  AGENTS  OF  THE  PUBLIC. 

The  same  demand  for  Government  control  comes,  also,  from 
those  who  use  the  railroads — that  is  to  say,  from  the  general 
public.  But  this  demand,  I  think,  and  the  troubles  that  confront 
the  railroads  because  of  it,  spring  largely  from  different  con- 
siderations. A  radical  change  is  taking  place  in  the  public,  con- 
ception of  what  a  railroad  is.  Up  to  recent  times  it  has  been 
taken  for  granted  that  railroading  is  a  branch  of  private  busi- 
ness. That  has  been  substantially  the  conception  embodied  in 
law,  and  that  has  certainly  been  the  conception  of  those  building 
and  operating  railroads.  But,  if  that  is  the  correct  conception 
of  railroading,  what  is  the  objection  to  rebating?  It  is  a  well 
established  characteristic  of  commercial  business  that  goods  can 
be  moved  in  a  wholesale  way  more  cheaply  than  at  retail.     If, 

122 


then,  railroading  is  a  private  business,  why  should  it  not  be  all 
right  for  the  largest  shipper  to  be  given  the  lowest  rates?  Ex- 
perience, on  the  other  hand,  has  made  it  clear  that  the  rail- 
roads, upon  whom  everybody  is  dependent,  by  practicing  rebat- 
ing, make  it  possible  for  the  favored  shipper  to  drive  all  com- 
petitors out  of  the  market.  Hence  the  belief  is  becoming  gen- 
eral, outside  perhaps  of  railroad  and  investment  circles,  that 
railroads  are  not  to  be  looked  upon  as  conducting  a  private 
business ;  they  are  rather  to  be  thought  of  as  private  agents 
conducting  a  part  of  the  business  of  the  State.  In  other  words, 
what  the  public  wants  in  railroad  management  is  the  public 
quality,  as  distinguished  from  the  business  quality.  That  is  to 
say,  it  wants  equality  of  treatment  for  all  alike,  large  shippers 
and  small,  instead  of  the  discriminations  that  are  usual  and  to 
be  expected  in  private  business.  The  importance  of  the  dis- 
tinction can  be  well  illustrated  by  the  tariff.  An  importer  who 
brings  into  the  country  $1,000,000  worth  of  silk  goods  must  pay 
exactly  the  same  rate  of  duty  as  the  importer  who  brings  in 
only  $1,000  worth.  That  equality  of  treatment  indicates  the 
public  quality  of  the  tariff.  Suppose,  on  the  other  hand,  that, 
after  the  manner  of  business,  the  tariff  charged  the  large  im- 
porters only  40  per  cent.,  and  made  the  little  ones  pay  60  per 
cent.,  is  it  not  clear  that  the  large  importers  could  drive  all  the 
little  ones  out  of  business?  But  that  is  precisely  what  the  rail- 
roads have  been  doing  with  their  rebates ;  and  that  is  why  the 
public  are  no  longer  willing  to  admit  that  railroading  is  a  private 
business.  That  is  why  the  people  demand  that  the  railroads 
themselves  should  recognize  that  they  are  only  private  agents 
doing  part  of  the  public  business;  and  that  is  why  the  public 
demand  that  the  law  henceforth  shall  proceed  upon  this  new 
view  of  what  railroads  are. 

DOES  THIS  INVOLVE  GOVERNMENT  OPERATION? 

The  demand  heard  in  some  quarters  that  railroads  shall  belong 
to  the  Government,  and  be  operated  by  the  Government,  presum- 
ably does  not  spring  from  any  special  desire  to  have  the  Govern- 
ment do  this  business  directly  instead  of  through  private  agen- 
cies; but  it  springs  principally  from  the  notion  that  in  no  other 
way  can  railroad  service  be  stamped  with  the  public  quality 
that  means  absolute  equality  of  treatment  of  big  and  little  ship- 
pers,  and  big  and   little   places ;   in    a   word,   that   all   shall   be 

123 


treated  alike.  Personally,  I  do  not  believe  that  public  owner- 
ship or  public  operation  are  either  the  only  ways  or  the 
best  ways  to  obtain  the  desired  results.  Two  things,  however, 
remain  to  be  said:  The  first  is  that  it  rests  very  largely  with 
railroad  directors  and  managers  themselves  whether  the  coun- 
try is  driven  into  public  ownership  and  operation  of  the  rail- 
roads or  whether  the  country  can  continue  to  avail  of  private 
initiative,  private  enterprise,  and  private  capital  in  this  depart- 
ment of  the  public  service.  The  second  is,  that,  if  the  private 
management  of  railroads  is  to  be  indefinitely  continued,  Gov- 
ernment regulation  both  of  railroad  finances  and  of  railroad 
service  is  absolutely  essential.  It  may  be  taken  for  granted 
that  the  public  will  insist,  unceasingly,  on  having  the  public 
quality,  of  equal  treatment  for  all,  predominate  in  all  the  rela- 
tions of  the  railroads  to  the  public,  as  distinguished  from  the 
business  quality  of  discrimination  on  the  basis  of  the  volume 
of  business.  Government  regulation  may  indeed  lead  to  the 
non-production  of  multi-millionaires  as  a  by-product  of  rail- 
roading, but  it  ought  also  to  mean,  to  investors,  increasingly 
safe  returns. 

SHALL  STATE  OR  NATION  REGULATE  RAILWAYS? 

But  regulation  by  law  in  the  United  States  raises  another 
question.  Shall  it  be  regulation  by  the  States  or  by  the  United 
States,  or  by  both?  For  the  most  part,  this  question  is  argued 
from  the  constitutional  point  of  view.  It  is  easy  to  say  that  the 
jurisdiction  of  the  United  States  is  limited  to  interstate  com- 
merce, and  the  jurisdiction  of  each  State  to  commerce  within 
itself.  But  that  leaves  open  the  question,  what  are  the  limits  of 
interstate  commerce?  To  answer  that  question  one  must  con- 
sider both  history  and  present  fact.  There  are  two  clauses  in  the 
Constitution  of  the  United  States,  as  Judge  Amidon  recently 
pointed  out,  and  not  one  only,  that  bear  upon  the  subject.  The 
first  is  the  clause  forbidding  any  State  to  levy  duties  on  imported 
merchandise ;  and  the  second  is  the  clause  placing  inter-state  com- 
merce under  the  control  of  the  general  government.  In  other 
words,  the  framers  of  the  Constitution,  having  seen  how  ready 
each  State  was,  in  the  days  preceding  our  present  Union,  to 
advantage  itself  by  laying  burdens  upon  its  neighbors,  inserted 
these  two  clauses  to  obviate  this  danger.  They  forbade,  explicitly, 
direct  attacks  by  one  State  on  the  commerce  of  another,  in  the 

124 


form  of  duties;  and  then,  recognizing  that  what  the  States  could 
do  directly,  they  could  also  do  indirectly,  the  whole  subject  of  inter- 
state commerce  was  placed  under  the  general  control,  in  order  to 
make  it  impossible  for  any  one  State  to  injure  another. 

FORCES  WHICH  FAVOR  NATIONAL  ACTION. 

So  much  for  history.  Now  for  the  present  fact.  As  long  as 
strong  individuals  could  get  favorable  terms  for  themselves,  they 
were  indifferent  to  the  question  of  freights  as  that  question  affects 
localities.  But  it  may  be  taken  for  granted  that  the  end  of  rebating 
has  introduced  the  day  of  strife  between  localities  for  what  each 
will  call  fair  treatment.  As  competing  localities  are  often,  if  not 
always,  in  different  States,  the  appeal  of  each  State  to  protect 
its  own  is  likely  to  become  more  and  more  urgent.  In  the  rate 
bills  already  passed  in  different  States,  there  is  complete  disregard 
of  the  effect  of  the  action  of  one  State  on  the  railroad  service  of 
any  other  State.  This  is  a  force,  therefore,  making  steadily  for 
Federal  control.  In  other  words,  it  is  a  modern  exhibition  of  the 
spirit  that  originally  caused  the  interstate  commerce  clause  to 
be  placed  in  the  United  States  Constitution.  The  railroads  them- 
selves, also,  have  done  everything  to  make  Federal  control  inevit- 
able; for  they  have  shown  themselves,  if  not  lawless,  at  least 
disposed  to  select  for  themselves  the  law  that  they  propose  to 
obey.  They  have  incorporated  in  the  State  that  will  give  them 
the  most  favors;  and  they  have  pursued  their  devious  way  in 
and  out  between  the  State  and  Federal  law^with  almost  the  capac- 
ity of  water  for  finding  the  weakest  spot.  The  enquiry  now  going 
on  in  New  York  into  Standard  Oil  affairs  has  revealed  how 
skilfully  large  corporations  are  advised,  so  that  they  can  evade 
an  unwelcome  requirement  of  Federal  control  by  taking  refuge 
under  State  control.  When  State  control  pinches,  they  appeal  just 
as  readily  to  the  Federal  law.  This  state  of  facts  tends  constantly 
to  the  widening  of  the  meaning  of  the  words,  "interstate  com- 
merce," in  the  United  States  Constitution.  It  seems  to  me  alto- 
gether likely  that  these  words  will  ultimately  be  given  a  meaning 
so  wide  as  to  embrace  all  commerce  as  to  which  there  is  any  pos- 
sibility that  action  by  one  State  may  affect  unfavorably  any  other 
State.  In  other  words,  I  think  that  ultimately  one  law  will 
govern  all  railroads  bearing  interstate  relations  in  substantially 
all  their  relations  to  commerce,  whether  within  the  State  or  with- 
out the  State.     However  great  the  fear  of  the  common  people 

125 


may  be  of  centralization  in  government,  I  think  that  fear  will 
prove  to  be  less  great  than  their  fear  of  centralization  in  cor- 
porations controlling  the  highways  of  commerce,  that  are  so  far 
lawless  as  to  be  able  to  select,  largely  at  their  own  pleasure,  the 
law  that  they  will  observe,  whether  national  or  local. 

PURPOSES  OF  GOVERNMENTAL  REGULATION. 

If  it  be  accepted,  as  it  appears  that  it  must  be,  that  an  era  of 
governmental  control,  either  by  the  States  or  by  the  nation,  or  by 
both,  has  set  in,  it  is  important  to  consider  what  ought  to  be  the 
characteristics  of  such  control.  Clearly  the  laws  regulating  rail- 
road corporations  ought  to  have  in  mind  as  their  object  the 
securing  of  equal  treatment  for  all  citizens;  and,  in  return,  they 
should  give  the  railroads  the  protection  of  the  Government  in  the 
conduct  of  the  business  committed  to  their  charge,  as  agents  of 
the  public.  Doubtless  publicity  is  one  of  the  essential  features 
of  Government  control;  but  publicity  ought  to  be  applied  not 
only  to  the  record  of  what  has  been  done;  it  may  also  be  made 
highly  useful  in  passing  upon  the  propriety  of  important  things 
that  are  proposed  to  be  done.  Already  this  principle  has  been 
resorted  to,  more  or  less  freely,  in  many  of  the  Acts  relating 
to  the  control  of  railroads ;  but  it  will  yet  be  found,  I  think,  that 
it  can  be  applied  more  and  more  freely  to  questions  of  policy,  as 
circumstances  bring  such  questions  to  the  front.  Mr.  Dawes, 
recently  Comptroller  of  the  Currency,  has  pointed  out  very 
forcibly  that  the  Sherman  Anti-Trust  Act,  passed  in  1890,  as  in- 
terpreted by  the  Supreme  Court,  has  worked  great  hardship  to  the 
railroads  without  being  of  any  advantage  to  the  public.  This  is 
because  the  law  undertakes  to  forbid  all  combinations  in  business, 
without  regard  to  the  nature  of  the  combination.  In  other  words, 
it  does  not  distinguish  between  combinations  having  a  good 
object  and  combinations  having  a  bad  object.  It  seems  clear  that 
a  law  which  would  permit  combinations  between  railroads,  after 
the  terms  of  the  proposed  agreement  had  been  submitted  to  the 
Interstate  Commerce  Commission  and  had  been  approved  by  that 
body,  would  be  making  use  of  the  force  of  publicity  in  a  very 
helpful  way.  Agreements  that  are  perfectly  understood  by  the 
public  at  the  time  of  making,  and  that  are  made  with  the  authority 
of  the  public,  and  that  are  subject  to  revision,  in  case  of  need, 
by  the  same  authority,  may  reasonably  be  expected  to  work  in 
the  public  interest.    It  is  the  things  that  are  done  in  secret,  with- 

126 


out  public  knowledge,  and  often  without  regard  to  the  public 
interest,  from  which  the  public  suffer.  In  an  age  like  this,  when 
the  large  unit  is  demonstrating  its  economy  in  everything;  when 
the  steamships  are  larger  than  ever  before;  when  locomotives 
are  more  powerful  than  ever  before;  when  every  sort  of  combina- 
tion in  mechanics  is  on  a  scale  greater  than  ever  dreamed  of  in  any 
previous  epoch;  it  is  not  only  idle  to  suppose  that  the  industries 
and  transportation  systems  of  the  country  can  be  successfully 
conducted  in  small  units,  but  it  is  also  manifestly  to  the  disadvant- 
age of  the  public  to  try  to  have  them  so  conducted.  The  large  cor- 
poration has  demonstrated  its  efficiency,  and  its  economy,  too 
strongly  to  leave  any  room  for  doubt  that  in  a  country  like  ours, 
if  the  people  are  to  be  well  served,  there  must  be  large  combina- 
tions in  the  transportation  service,  as  elsewhere.  The  problem 
is  how  to  secure  the  benefit  of  such  combinations,  without  suffer- 
ing the  evils  which  they  are  also  capable  of  developing.  The  only 
answer  that  has  been  suggested,  outside  of  Government  owner- 
ship and  operation,  is  Governmental  control;  and  that  control 
ought  to  be  so  devised  as  both  to  permit  and  to  encourage  combi- 
nations and  joint  agreements  between  railroads  whenever  these 
are  in  the  public  interest.  The  two  things  that  are  necessary  to 
make  such  regulation  effective  are,  first  of  all,  a  recognition  that 
the  railroad  service  of  the  country  is  really  a  part  of  the  public 
service,  although  it  is  conducted  through  private  agencies;  and, 
secondly,  that  the  object  of  Governmental  control  of  the  private 
agencies  doing  this  business  is  not  to  limit  their  activities  but  to 
make  sure  that  all  their  activities  are  conceived,  first  and  last,  in 
the  public  interest.  This  is  really  the  democratization  of  business. 
It  is  very  greatly  to  be  hoped  that  legislation  along  these  lines  can 
be  had  from  Congress  at  an  early  day. 

THE  CHAIRMAN :  Gentlemen  of  the  Conference,  this  sub- 
ject which  the  conference  has  under  consideration  is  one  so  large 
that  it  reaches  to  all  points  throughout  the  Union.  It  is  im- 
portant that  we  hear  the  views  from  different  sections  of  the 
Union,  and  moving  on  from  New  York  to  Yankton,  S.  D.,  you 
will  hear  from  a  gentleman  from  the  West.  I  have  the  honor  of 
introducing  Hon.  Bartlett  Tripp,  of  Yankton,  South  Dakota, 
whose  subject  is  the  'Towers  of  the  State  and  Nation  Over 
Corporations  and  Trusts." 

127 


Mr.  Bartlett  TRirp. 

Mr.  Chairman — You  will  find  that  what  I  am  going  to  say 
closely  follows  what  the  other  gentleman  has  said  to  you,  and  in 
order  to  prove  that  he  has  stolen  his  paper  from  me,  and  not  I 
from  him,  I  am  going  to  read  rather  than  to  make  an  oral 
argument. 

We  cannot  intelligently  discuss  the  great  questions  of  com- 
binations and  trusts  involved  in  the  modern  legislation  of 
Congress  and  the  States  without  some  knowledge  of  the 
powers  of  government  possessed  by  the  State  and  nation. 
It  is  easy  to  define  the  powers  granted  to  the  national  Govern- 
ment, for  by  the  terms  of  the  instrument  granting  such  powers 
all  powers  not  granted  to  the  general  Government  are  expressly 
reserved  to  the  States. 

The  careful  engineer  confirms  the  accuracy  of  his  work  by 
retracing  his  random  lines  and  re-examining  the  monuments  he 
has  erected  and  the  corners  he  has  made,  but  we  can  no  more 
retrace  the  lines  of  constitutional  history  than  we  can  retrace  the 
divergent  waves  produced  by  a  falling  body  into  the  waters  of 
the  ocean,  or  the  distance  or  direction  of  stray  messages  picked 
up  by  a  Marconi  receiver.  Our  national  Government  has  grown 
and  expanded  in  the  manner  of  the  ocean  wave,  or  the  wireless 
message,  until  its  random  lines  have  so  widened  into  space  that 
it  is  difficult  to  trace  them  to  a  primitive  point.  The  Constitution 
of  to-day  bears  little  resemblance  to  that  framed  by  the  conven- 
tion itself.  The  Constitution  of  the  convention,  the  Constitution 
adopted  by  our  forefathers,  at  the  polls,  was  a  patch-work  of 
compromises,  a  skeleton  of  government,  which  seemed  to  assume 
the  .semblance  of  national  Government  by  the  surrender  of  the 
fewest  possible  sovereign  powers  on  the  part  of  the  States.  The 
framers  did  not  seem  to  seek  to  found  a  nation.  That  word  is 
not  contained  in  the  Constitution  itself,  and  by  the  preamble, 
where  we  would  naturally  look  for  .the  aims  and  purposes  of 
the  instrument,  the  object  is  declared  to  be  "to  form  a  more  per- 
fect union" — a  union  of  independent  and  sovereign  States,  and 
not  a  sovereign  nation.  And  while  this  view  was  not  entertained 
by  all  the  members  of  the  convention,  nor  by  all  the  people  who 
voted  for  its  adoption,  it  is  true  that  such  view  was  entertained 
by  many  of  our  ablest  lawyers  and  statesmen,  down  to  the  Re- 
bellion, which  by  the  arbitrament  of  arms  has  determined  for 
all  time  that  we  are  a  nation  and  not  a  confederacy  of  States. 

One  does  not  need  to  read  the  proceedings  of  that  stormy 

128 


convention,  nor  the  discussions  of  the  campaign  which  submitted 
the  Constitution  to  the  people  for  adoption,  to  learn  with  what 
jealousy  was  guarded  every  grant  of  power  yielded  up  by  the 
States  to  the  Federal  Government,  and  the  wonder  is  that  out 
of  such  a  Babel  of  conflicting  interests  so  strong  and  elastic  a 
frame  work  of  government  could  have  been  evolved.  Its  strength 
lay,  not  in  the  grants  expressly  made,  but  in  the  prohibitions  upon 
State  legislation  and  the  implied  powers  that  have  been  read 
into  it  by  the  courts. 

PAUCITY  OF  POWER  DIRECTLY  GRANTED  TO   NATION. 

The  eighteen  express  grants  to  the  Federal  Government,  out- 
side of  those  to  regulate  commerce  and  establish  postoffices  and 
post-roads,  contain  no  enumeration  that  fixes  and  determines  any 
great  sovereign  rights.  The  Constitution  of  our  country,  then, 
is  not  found  alone  in  the  mere  words  of  the  instrument,  framed 
by  the  convention  and  adopted  by  the  people,  but,  like  the  com- 
mon law,  it  must  be  sought  for  in  the  decisions  of  the  courts  and 
the  history  and  traditions  of  the  people.  The  Constitution  is  one 
of  evolution.  It  has  grown  and  expanded  with  the  growth  and 
expansion  of  the  country  itself.  The  framers  of  that  instrument, 
as  it  came  from  their  hands,  would  not  recognize  it  to-day  as  it 
has  been  moulded  and  fashioned  by  administrative  action  and 
the  decisions  of  the  courts.  The  scanty  grants  of  power  expressly 
given  to  the  general  Government  have  been  construed  by  the 
necessities  of  domestic,  interstate,  and  international  interests  to 
have  a  strength  and  meaning  little  contemplated  or  imagined  by 
the  men  that  drafted  or  adopted  them.  The  one  clause  that 
perhaps  more  than  any  other  has  given  power  and  strength  to 
the  arm  of  the  nation,  known  as  the  Interstate  Commerce  clause, 
contained  in  the  single  sentence  giving  to  Congress  the  power  "to 
regulate  commerce  with  foreign  nations  and  among  the  several 
States  and  with  the  Indian  tribes,"  was  not  conceived  of  or 
believed  to  contain  the  latent  power  that  would  eventually  govern 
and  control  the  commercial  industries  and  affairs  of  a  great 
nation. 

EARLY  INTERPRETATION  OF  COMMERCE  CLAUSE. 

The  great  commercial  and  industrial  power  of  the  nation  had 
not  then  come  into  existence,  and  its  present  development  and 
necessities  could  not  have  been  imagined  or  comprehended  by  the 

129 


framers  of  a  government  intended  to  meet  exigencies  then  exist- 
ing, or  that  had  existed  in  the  past.  In  fact,  the  clause  seems  to 
have  evoked  little  or  no  discussion  in  the  convention,  further  than 
as  a  provision  giving  power  to  the  Federal  Government  to  settle 
conflicts  between  the  States  and  between  the  Indian  tribes.  And 
when  Attorney  General  Edmund  Randolph,  one  of  the  best 
lawyers  of  his  time,  and  one  of  the  ablest  members  of  the  con- 
vention that  framed  the  Constitution,  was  asked  by  President 
Washington  for  his  opinion  as  to  the  meaning  of  this  clause  of 
the  Constitution,  he  replied : 

"The  power  to  regulate  commerce  amounts  to  little  more 
than  *  *  *  to  prevent  taxes  on  imports  and  exports ;  prefer- 
ence to  one  port  over  another  by  any  regulation  of  commerce  or 
revenue,  and  duties  upon  the  entering  or  clearing  of  vessels  of 
one  State  in  the  ports  of  another." 

Opinions  of  Atty.  Gens.  Feb.  12,  1791. 

And  in  accordance  with  this  opinion,  we  find  States  generally 
granting  exclusive  privileges  to  interstate  carriers  of  freight  and 
passengers.  Vermont,  in  October,  1792,  granted  to  Levi  Pease 
the  exclusive  right  to  run  a  stage  line  from  Springfield,  Massa- 
chusetts, through  Vermont  to  Dartmouth  College,  New  Hamp- 
shire, for  a  period  of  twelve  years,  and  statutes  of  other  States 
of  a  similar  character  were  of  frequent  enactment. 

DEVELOPMENT  OF  POWER  TO  ESTABLISH  POST-ROADS. 

About  this  time,  1792,  the  question  arose  in  Congress  upon  a 
motion  to  allow  stage  proprietors  carrying  the  mails  to  be  per- 
mitted to  carry  passengers,  and  a  Mr.  Milne,  Representative  from 
New  York,  is  reported  to  have  made  an  exhaustive  argument  in 
the  House  of  Representatives  upholding  the  rights  of  the  States 
to  pass  such  exclusive  statutes,  and  the  motion  was  lost;  and 
down  to  the  time  of  the  filing  of  the  opinion  of  Judge  Marshall, 
in  Gibbons  vs.  Ogden,  the  exclusive  power  of  the  States  over 
navigable  waters  and  international  highways  within  their  boun- 
daries seems  to  have  been  unchallenged.  And  notwithstanding 
the  decisions  of  the  Supreme  Court  of  the  United  States,  the 
State  of  New  York  assumed  to  give  to  the  Erie  canal  the  exclu- 
sive power  of  carrying  freight ;  and  down  to  1847  the  Utica  and 
Schenectady  lines  of  railway,  which  were  subsequently  merged 
into  the  New  York  Central,  were  permitted  to  carry  passengers 
only,  and  were  prohibited  from  carrying  freight,  except  in  winter 
months  when  the  canal  was  closed. 

130 


And  such  exclusive  right  existed  in  favor  of  the  old  Camden 
and  Amboy  Railroad,  running  between  Philadelphia  and  New 
York,  and  was  sustained  by  the  New  Jersey  court  (22  N.  J.  L., 
623). 

The  States  also  maintained  the  right  of  precluding  the  United 
States  from  crossing  their  boundary  lines  in  the  location  of  post- 
roads,  etc.,  without  consent  of  the  State  itself,  and  we  find  the 
State  of  Maryland,  January  10,  1803,  granting  to  Congress  the 
power  to  repair  post-roads  within  the  boundaries  of  that  State, 
"provided  that  the  grant  did  not  authorize  Congress  to  change 
the  direction  of  any  existing  road,  nor  to  open  new  ones." 

What  lawyer  would  now  contend  that  the  national  Congress 
has  not  the  right  to  establish  and  maintain  post-roads  in  any 
part  of  the  United  States,  even  against  the  will  of  the  State  itself? 
The  power  "to  establish  postoffices  and  post-roads"  is  one  of  the 
express  grants  to  the  national  Government  and  carries  with  it 
the  power  not  only  to  build,  lease  or  purchase  such  roads,  but  to 
maintain  the  same.  The  Supreme  Court  of  the  United  States 
sustained  the  action  of  Congress  in  chartering  the  Central  Pacific 
Railway,  and  authorizing  it  to  construct  its  line  of  road  across 
the  State  of  California,  as  well  as  through  the  Territories.  (Cali- 
fornia vs.  Central  Pac.  Ry.,  127  U.  S.  1.) 

It  was  under  this  clause  of  the  Constitution,  as  well  as  under 
the  Interstate  Commerce  clause,  that  President  Cleveland  sent 
United  States  troops  into  the  State  of  Illinois  to  protect  the 
mails  and  property  of  citizens  against  armed  mobs  over  the 
protest  of  the  Governor  and  authorities  of  the  State.  Who 
denies  his  authority  so  to  have  done? 

The  right  to  regulate  commerce  between  the  States,  and  the 
right  to  establish  post-roads,  carries  with  it  the  power  to  maintain 
such  roads  by  force,  if  necessary,  against  lawless  mobs  or  the  will 
of  the  State.  The  proposition  would  now  seem  too  plain  for 
discussion,  that  when  the  State  has  granted  to  the  national  Gov- 
ernment powers  to  establish  post-roads  and  regulate  commerce, 
it  granted,  necessarily,  the  power  to  enter  such  State  whenever 
necessary  for  such  establishment  and  regulation,  without  asking 
permission  so  to  do. 

The  right  to  establish  post-roads,  which  carries  with  it  the 
power  to  maintain  and  regulate  the  roads  so  established,  is  yet 
an  embryonic  power  of  the  Government,  susceptible  of  equal,  if 
not  greater  evolution  than  that  of  the  Interstate  Commerce  clause 
itself.    And  the  two  powers  combined  give  to  Congress  the  power 

131 


to  establish  all  kinds  of  post-roads,  and  the  regulation  of  all 
interstate  commerce  that  may  be  transported  thereon.  Congress 
may  make  of  any  or  every  railroad  in  the  country,  a  post-road, 
and  prohibit  State  interference  with  the  management  or  control 
of  such  roads,  except  to  prescribe  mere  police  regulations,  and 
may  regulate  by  its  own  statutes,  the  transportation  of  passengers 
and  freights,  including  rates  of  all  interstate  commodities  carried 
thereon. 

SLOW  GROWTH  OF  THE  SOVEREIGN  POWER  OF  THE  NATION. 

But  it  is  not  to  the  express  grants  made  by  the  States  to  the 
Federal  Government  that  we  alone  look  for  the  evolution  of  its 
national  powers,  nor  to  the  powers  necessarily  implied  by  such 
express  grants,  but  the  greatest  and  most  important  powers  now 
exercised  by  it  are  those  inherent  powers  that  come  to  it  as  a 
nation.  The  States  and  the  people  themselves  were  slow  in 
recognizing  the  Federal  Government  as  a  nation.  Jefferson 
believed  he  ought  to  insist  upon  a  constitutional  amendment 
before  signing  the  treaty  that  gave  us  the  largest,  and  in  some 
respects  the  richest  portion  of  our  national  domain.  He  strenu- 
ously maintained  that  the  Federal  Government  had  no  power, 
express  or  implied,  that  gave  it  the  right  to  acquisition  of  terri- 
tory. In  other  words,  that  the  Government  was  a  confederacy  of 
sovereign  States,  and  not  a  nation.  The  Supreme  Court,  how- 
ever, quickly  determined  that  the  powers  expressly  and  impliedly 
granted  by  the  States  to  the  Federal  Government  were  sovereign 
powers,  and  that  both  the  State  and  the  nation  were  sovereign  in 
the  exercise  of  the  powers  each  was  permitted  under  the  Consti- 
tution to  exercise. 

From  these  decisions  it  followed  that  all  the  implied  powers  of 
a  nation,  among  which  were  the  right  to  acquire  territory  by 
purchase  or  conquest  belonged  to  the  Federal  Government. 

As  we  have  already  said,  the  powers  belonging  to  the  Federal 
Government  as  a  nation,  have  not  been  rapid  in  their  evolution. 

Many  of  our  older  and  ablest  lawyers  strenuously  maintained 
that  the  Federal  Government  had  no  right  of  eminent  domain, 
one  of  the  highest  attributes  of  sovereignty;  and  as  late  as  1866, 
Lot  M.  Morrill,  one  of  the  ablest  lawyers  that  ever  held  a  seat 
in  the  Senate  of  the  United  States,  in  a  speech  before  that  body, 
declared :  "Nobody  has  ever  contended,  and  I  presume  nobody 
ever  will  contend  that  the  right  of  Eminent  Domain  exists  any- 
where except  in  the  States." 

132 


The  reasoning  of  this  able  lawyer  was  along  the  line  so  many 
times  followed,  that  the  Federal  Government  got  no  powers  except 
those  expressly  granted  or  necessarily  implied,  and  as  the  power 
of  eminent  domain  was  not  expressly  granted,  nor  was  it  a 
necessary  implication  from  those  granted,  it  did  not  belong 
to  the  Federal  Government.  He  quite  overlooked  that  it  might 
have  come  from  that  higher  and  prolific  source  of  power  that 
came  to  the  Federal  Government  as  a  nation,  and  which  was 
later  so  held  by  the  Supreme  Court  in  Kohl  vs.  U.  S.,  91  U.  S.,  367. 

The  power  "to  coin  money"  did  not  give  to  the  Federal  Gov- 
ernment the  power  to  issue  legal  tender  notes  as  money,  and 
after  several  contradictory  decisions,  the  Supreme  Court  finally 
rested  the  right  upon  the  sovereign  power  of  the  nation  itself. 

Hepburn  vs.  Grisworld,  8  Wall,  602;  Legal  Tender  Cases,  12 
Wall,  457;  Juillard  vs.  Greenman,  no  U.  S.,  421. 

'  MAY  THE  NATION  EXERCISE   POLICE  POWER? 

The  police  power  of  the  Government  was  for  a  long  time 
admittedly  vested  in  the  States.  Statesmen  so  declared  from 
their  places  in  our  legislative  halls,  and  judges  so  admitted  in  their 
opinions  from  the  bench,  and  it  was  emphatically  denied  that  the 
Federal  Government  possessed,  or  could  exercise,  police  powers 
in  any  form.  The  term  "police  powers,"  however,  has  come  to 
have  so  comprehensive  a  meaning,  and  covers  such  a  multitude  of 
evils,  that  the  courts  are  swinging  from  their  moorings  and 
declaring  that  police  powers,  as  now  understood,  may  be  exer- 
cised by  the  United  States  in  carrying  out  the  powers  expressly 
or  impliedly  granted  to  them  by  the  Constitution. 

Judge  Bradley  in  Willamette  Iron  Bridge  Company  vs.  Hatch, 
125  U.  S.  I,  says:  "The  clause  in  question  cannot  be  regarded 
as  establishing  the  police  powers  of  the  United  States  over  the 
rivers  of  Oregon."  *  *  *  But  he  says,  "We  do  not  doubt 
that  Congress,  if  it  saw  fit,  could  thus  assume  the  care  of  said 
streams  in  the  interest  of  foreign  and  interstate  commerce." 

And  Congress  has  assumed  to  exercise  this  right  in  requiring 
cars  and  trains  engaged  in  interstate  commerce,  to  be  supplied 
with  grab  irons  for  its  brakemen,  and  the  most  approved  patterns 
of  modern  appliances  for  the  safety  and  convenience  of  employes. 
Such  enactments  are  in  the  strictest  sense,  police  regulations  and 
what  lawyer  of  to-day,  doubts  the  power  of  Congress  to  so 
enact?  It  has  become  a  necessity  that  such  laws  should  be  gen- 
eral and  uniform  in  every  State  of  the  Union.     Railroad  com- 

133 


y 


panies  would  be  powerless  to  comply  with  regulations  of  such 
character  differing  in  every  State  through  which  its  trains  must 
pass.  The  cars  of  an  interstate  commerce  train,  complying  with 
the  police  regulations  of  one  State,  might  be  wholly  deficient 
in  the  requirements  of  another,  and  as  a  result  such  State  legisla- 
tion, if  permitted,  might  purposely  hinder,  annoy  and  delay  all 
interstate  commerce  at  will.  It  is  this  rapid  development  in  the 
business  and  commerce  of  our  country  that  has  brought  about 
the  change  of  legislation  and  decisions  of  the  courts. 

It  was  at  first  questioned,  when  Congress  granted  charters  to 
some  of  our  transcontinental  railways,  whether  it  had  power  so  to 
do,  and  it  was  finally  conceded  that  such  rights  might  be  extended 
to  roads  engaged  in  interstate  commerce,  but  questioned  as  to  its 
right  to  grant  corporate  powers  in  general. 

The  State  of  Mississippi  in  Williams  vs.  Caswell,  51  Miss.,  822, 
held  that  a  private  corporation  in  the  District  of  Columbia,  char- 
tered by  Congress,  was  a  foreign  corporation  in  that  State,  and 
must  comply  with  the  regulations  required  of  foreign  corpora- 
tions entering  the  State. 

UNLIMITED    POWER    OF    NATION    OVER    CORPORATIONS    DE- 
DUCED FROM  ITS  SOVEREIGN  POWER. 

In  my  judgment  no  reason  exists  for  the  distinction  between 
corporations  engaged  in  interstate  commerce  and  those  not  so 
engaged.  New  Jersey  assumes  to  incorporate  organizations  from 
every  part  of  the  Union,  and  to  deny  them  sometimes  the  right  to 
exercise  the  powers  so  granted  within  the  mother  State.  The 
right  to  grant  corporate  powers  is  a  sovereign  one,  a  franchise 
that  flows  from  the  sovereign  will,  and  such  rights  are  inherent 
in  every  sovereign  State,  and  when  the  Government  of  the  United 
States  is  admitted  and  recognized  to  be  a  sovereign  one,  its  right 
to  grant  charters  and  enact  laws  of  incorporation,  must  be  admit- 
ted and  recognized  as  well.  It  has  the  same  power  to  grant 
charters  and  franchises  that  it  has  to  exercise  the  right  of  eminent 
domain,  or  to  acquire  foreign  territory.  All  such  powers  are 
sovereign  powers  and  come  to  it  with  the  formation  of  a  sover- 
eign State.  It  will  not  do  to  say  that  the  nation  can  grant 
charters  for  the  exercise  of  national  powers  only;  that  railroads 
chartered  by  it  can  engage  in  interstate  commerce  alone,  or  that 
banks  chartered  by  it  can  exercise  their  powers  in  administration 
of  Government  functions  only.  All  corporations,  in  theory,  are 
formed  primarily  for  the  benefit  of  the  Government,  but  second- 

134 


arily  and  in  fact  for  the  benefit  of  the  corporations  themselves. 
The  State  grants  its  charters,  theoretically  for  the  benefit  of  the 
State  and  the  people,  but  in  results  such  charters  are  for  the 
benefit  of  the  corporation,  even  sometimes  to  the  detriment  of 
the  people  and  the  State. 

It  does  not  result,  however,  because  in  theory  these  corpora- 
tions are  chartered  for  the  benefit  of  the  State,  that  they  must 
employ  their  chartered  powers  in  the  service  of  the  State  alone. 
On  the  contrary,  the  State,  when  employing  such  agencies,  is 
obliged  generally  to  pay  an  equal,  if  not  higher  compensation, 
than  the  individual.  The  chartered  powers  granted  are  to  serve 
not  the  State  only,  but  individuals  and  persons  for  the  common 
benefit  of  all,  as  well  as  the  corporation  itself.  And,  as  we  have 
said,  such  corporations  are  sometimes  chartered,  as  in  New  Jersey, 
not  to  serve  the  State,  but  persons  outside  of  and  beyond  the 
boundary  line  of  the  State.  Why,  then,  should  corporations 
chartered  by  the  national  Government  be  limited  in  the  exercise 
of  their  powers  to  those  granted  by  the  Constitution?  If  the 
Federal  Government  is  a  nation  exercising  sovereign  powers,  it 
has  the  right  to  create  corporations  with  all  the  powers  that  a 
State  corporation  can  have  and  exercise. 

It  is  true  that  the  courts  in  sustaining  the  incorporation  laws 
of  the  United  States  have  generally  based  their  decisions  upon 
the  ground  that  such  corporations  were  chartered  for  the  purpose 
of  aiding  in  or  carrying  into  execution  the  powers  expressly  or 
impliedly  granted  to  the  general  Government.  This  reasoning 
started  with  Judge  Marshall  in  McCullough  vs.  Maryland,  4 
Wheaton,  316,  in  sustaining  the  branch  bank  of  the  United  States 
located  in  that  State,  but  he  expressly  declares,  in  that  opinion, 
that  it  is  not  necessary  that  the  chartering  of  the  bank  be  solely 
for  the  benefit  of  the  Government  in  carrying  out  its  granted 
powers.  It  is  sufficient  if,  in  some  degree,  it  tends  so  to  do,  and 
this  view  has  been  adhered  to  by  later  decisions  following  and 
approving  Judge  Marshall's  opinion. 

It  is  upon  this  theory  that  the  present  national  banking  act 
stands  unchallenged  in  the  courts.  The  small  country  banks  are 
of  little  or  no  service  to  the  Federal  Government  in  the  admin- 
istration of  its  affairs.  These  banks  never  see  a  dollar  of  Gov- 
ernment deposits,  and  render  no  more  aid  to  the  Federal  Gov- 
ernment in  carrying  out  the  powers  granted  to  it  by  the  States 
than  the  banks  of  the  State,  nor  as  much  as  those  of  countries 
foreign  to  our  own.     If  it  be  true  that  it  is  not  the  quantity,  or 

135 


y 


amount,  of  aid  rendered  by  the  corporation  to  the  general  Gov- 
ernment that  determines  its  right  of  charter,  it  would  seem  that 
we  need  not  minutely  inspect  the  business  of  the  applicant  for 
national  incorporation  as  to  how  far  the  nation  would  be  benefited 
in  granting  the  same. 

It  seems  to  be  admitted  that  corporations  may  be  chartered  by 
the  national  Government  ad  libitum  in  aid  of  interstate  commerce. 
The  Supreme  Court  sustained  the  charter  of  the  North  River 
Bridge  Company,  for  the  construction  of  the  great  New  York 
bridge,  upon  the  ground,  as  in  case  of  the  Pacific  railroads,  that 
it  was  in  the  aid  of  interstate  commerce:  Luxton  vs.  North 
River  Bridge  Company,  153  U.  S.,  525,  and  in  this  age  of  expan- 
sion, while  almost  every  industry  reaches  beyond  the  State  boun- 
dary lines,  yet  corporations  in  the  interest  of  interstate  commerce 
cover  nearly  the  interests  of  the  business  world,  except,  perhaps, 
that  of  banking,  brokerage  and  insurance;  and  as  to  the  last  of 
these,  it  is  difficult  to  see  why,  upon  reason  and  analogy,  the 
Government  in  the  exercise  of  its  powers  would  not  be  benefited 
in  an  equal  if  not  a  higher  degree  by  the  incorporation  of  national 
brokerage  and  insurance  companies,  than  by  the  charter  of  coun- 
try banks. 

This  reasoning  brings  us  to  the  conclusion  that  while  we  con- 
tend all  kinds  of  businesses  which  have  become  interstate  in  char- 
acter may  be  of  sufficient  aid  to  the  Government,  within  the 
decisions  of  the  Supreme  Court,  to  warrant  their  incorporation 
by  Congress,  yet  it  would  be  sufficient  and  adequate  remedy  for 
the  present  to  permit,  if  not  to  require,  all  business  organizations 
engaged  in  interstate  commerce  to  become  chartered  by  the 
National  Government. 

FEDERAL    INCORPORATION,    IF    ENACTED,    SHOULD    BE    COM- 
PULSORY. 

A  general  incorporation  law,  enacted  by  Congress,  permitting 
such  incorporation,  would  be  eagerly  complied  with  by  every 
such  organization  doing  business  under  corporation  laws  of  the 
State.  But  so  desirable  an  end  should  not  be  left  to  the  will  of 
the  corporation  itself.  I  would  make  such  incorporation,  under 
national  law,  compulsory,  under  pain  of  suspension  of  interstate 
rights ;  and  the  grant  of  such  charters  should  be  coupled  with 
the  provision  and  reservation  that  the  Government  retain  the 
right  not  only  of  examination,  but  of  reasonable  regulation  as 
well.     It  is  true  that  such  right  of  regulation  is  held  to  exist  in 

136 


case  of  quasi  public  corporations,  and  corporations  like  elevators 
and  ferries,  affected  with  a  public  interest,  but  in  my  judgment, 
such  examination  and  regulation  should  be  extended  to  all  cor- 
porations to  whom  chartered  rights  are  granted  either  by  the 
State  or  nation. 

A  creature  should  not  be  greater  than  its  creator.  The  cor- 
poration which  is  created  for  the  benefit  of  the  people,  in  theory, 
should  be  such  in  fact.  Something  must  be  done  at  once  to 
allay  the  feeling  of  hostility  that  has  grown  up  amongst  the  peo- 
ple against  every  form  of  incorporation — stronger  now,  even, 
than  that  which  existed  in  England  prior  to  the  enactment  of  the 
statutes  of  mortmain. 

Combinations  of  capital  are  a  modern  necessity.  The  little  red 
shop  around  the  corner  has  gone  out  of  business  forever.  We 
cannot  return  to  ancient  methods  of  production.  Combinations 
of  capital  are  not  only  furnishing  to  the  people  of  our  own  coun- 
try better  goods  at  lower  prices,  while  the  price  of  labor  has 
been  maintained  and  advanced,  but  we  have  in  competition  with 
the  cheap  labor  of  the  Old  World  spanned  their  rivers  with  our 
bridges,  equipped  their  roads  with  our  cars  and  engines,  and 
from  our  mills  and  workshops  sent  our  mining  and  farming 
machinery  to  almost  every  part  of  the  known  world. 

We  ourselves  and  the  world  have  been  benefited,  not  only  by 
the  enterprise  of  our  people,  but  by  the  combinations  of  capital, 
so  that  while  we  reform,  we  must  not  break  down  and  destroy 
those  great  industries  through  which  our  prosperity  has  been 
derived. 

CORPORATIONS   SHOULD   BE   MADE   STRICTLY   ACCOUNTABLE 

FOR  ACTIONS. 

Our  people,  however,  forget  these  great  benefits  derived  and 
to  be  derived  from  combinations  of  capital,  when  they  observe 
the  evils  that  have  followed  in  their  train.  It  cannot  be  denied 
that  there  is  just  ground  for  complaint,  and  they  have  a  right 
to  demand  that  the  attendant  evils  of  combined  wealth  shall  be 
met  with  effectual  and  immediate  reform.  The  means  that  have 
brought  us  wealth  and  the  luxuries  of  life  must  not  become 
instruments  of  oppression  and  tyranny.  These  creatures  of  our 
generosity  must  continue  our  servants,  and  not  become  our 
masters. 

We  have  too  long  been  recreant  to  the  interests  of  the  people 

i37 


in  the  liberties  and  unrestricted  powers  we  have  granted  by  these 
chartered  rights. 

The  great  fortunes  of  the  country  have  been  built  up,  not  by 
the  increase  of  the  increment  of  values,  however  rapid  their 
multiplication  may  have  been,  but  by  methods  which,  perhaps, 
while  they  come  within  no  prohibition  of  existing  law,  are  be- 
lieved by  the  people  to  be  immoral  and  unjust.  We  have  been 
careful  of  the  interests  of  the  people  in  safeguarding  them 
against  usury,  worthless  currency  and  doubtful  or  unsafe  banks 
of  savings  and  deposit,  but  it  does  not  seem  to  have  occurred  to 
our  wise  legislators  that  where  10  per  cent,  of  the  earnings  of  our 
people  are  deposited  in  our  banks,  more  than  five  or  six  times 
this  amount  is  invested  by  the  wage-earners  and  common  people 
in  the  stock  and  bonds  of  these  corporations  that  are  wholly 
without  examination  or  regulation  on  the  part  of  the  Govern- 
ment. 

Their  minority  stock  is  wholly  at  the  mercy  of  the  majority 
and  the  great  fortunes  of  the  country  have  been  largely  accumu- 
lated by  a  system  of  wreckage,  in  depressing  the  values  of  the 
stock  until  the  minority,  forced  to  sell,  have  been  robbed  of  their 
investment,  and  the  majority  in  possession  and  control  of  the 
entire  property  of  the  corporation,  have  brought  back  the  stock 
again  to  its  original  value,  or  above. 

The  49  per  cent,  of  the  stock  is  continually  at  the  mercy  of 
the  51  per  cent.,  and  if  wreckage  do  not  occur,  an  unequal  and 
unfair  division  of  the  profits  is  much  too  frequent  a  result.  But 
the  worst  invention  of  modern  times  is  the  combination  and  con- 
solidation of  corporate  interests  into  one  great  and  controlling 
monopoly,  which  not  only  breaks  down  and  destroys  competition, 
but  deceives  and  robs  its  stockholders  in  its  very  formation  and 
inception.  These  great  monopolies,  seeking  to  combine  all  per- 
sons and  corporations  engaged  in  any  line  of  industry,  buy  up 
at  prices  so  tempting  as  not  to  be  resisted,  the  plants  or  works  of 
each  competitor,  and  in  the  new  corporation  which  is  generally 
promoted  by  some  great  financier,  whose  name  gives  to  it  an 
assurance  of  success,  the  dear  people  are  asked  to  invest  and  to 
purchase  its  stock,  at  a  price  so  fixed  as  to  pay  for  not  only  the 
purchase  price  of  all  the  property  so  combined,  but  to  leave  an 
amount  of  stock  aggregating  a  large  proportion  of  the  entire  sum 
to  be  divided  gratuitously  among  the  promoters  and  favored  few. 

138 


REGULATION  VS.  GOVERNMENT  OPERATION. 

The  stock  is  thus  at  its  inception  watered  to  perhaps  one- 
third  or  one-half  of  its  entire  amount,  and  the  investors,  who 
pay  full  price,  are  paying  perhaps  double  its  value,  and  the 
gratuitous  stock  goes  to  enhance  the  fortunes  of  promoters, 
already  too  large.  The  people  do  not  and  cannot  know  the 
methods  of  the  corporation  in  whose  stock  they  invest.  The 
president  or  directors  are  to  them  a  guaranty  of  the  dividends  for 
which  their  investment  is  made,  and  they  blindly  increase  the  for- 
tunes of  modern  financiers,  and  help  to  form  a  monopoly  that 
breaks  down  competition  and  becomes  too  radical  and  oppressive 
in  its  demands  upon  all.  These  methods,  and  others  that  I  have 
not  time  to  mention,  are  now  becoming  known,  and  the  intense 
feeling  engendered  among  the  common  people  must  lead  to  rem- 
edy or  revolution.  The  remedy  now,  which  must  not  only  be 
effectual  but  immediate,  lies  along  but  two  lines:  Government 
regulation,  or  Government  ownership.  I  am  not  one  of  those  who 
believe  in  a  paternal  Government.  I  believe,  with  the  founders  of 
the  Republic,  that  governments  were  instituted  to  protect  the 
weak  against  the  strong,  and  if  ever  that  necessity  existed  it  is 
now.  The  weak  are  people  who  do  not  belong  to  organizations 
or  combinations  of  any  kind.  We  are  being  injured  and  op- 
pressed both  by  capital  and  labor.  The  unions  of  laboring  men, 
which  were  encouraged  as  a  back-fire  to  protect  against  the  en- 
croachments and  tyranny  of  capital,  have  become  almost  as 
despotic  and  tyrannical  as  capital  itself.  As  lawyers,  however, 
we  have  learned  that  when  the  wrong  ceases  there  is  no  longer 
use  for  the  remedy,  and  we  are,  therefore,  assured  that  when  we 
have  given  to  labor  and  laboring  men  an  adequate  remedy  against 
the  oppression  of  capital  we  will  be  no  longer  troubled  with 
strikes  nor  demands  of  the  union. 

If  we  do  not  hasten  such  legislation  we  approach  govern- 
ment ownership,  or  the  worse  remedy — anarchy  and  revolution. 

Government  ownership  carried  beyond  public  utilities  crosses 
the  border  land  of  Utopia  to  that  of  socialism,  which  is  a  theme 
not  yet  so  advanced  as  to  demand  discussion  here. 

GOVERNMENT  OPERATION  INEFFECTIVE. 

Our  experiments  as  already  tried  in  Government  ownership 
do  not  give  hopes  of  ultimate  success.  A  republican  govern- 
ment is  not  framed  along  paternal  lines.     It  is   not   central 

139 


enough,  or  I  might  better  say  it  is  not  despotic  enough,  to  deal 
successfully  with  these  great  questions  of  business  and  finance, 
and  even  the  governments  of  Europe  cannot  be  cited  as  emi- 
nent examples  of  its  success.  Passengers  are  transported  on 
Government  roads  on  the  Continent  of  Europe  at  rates  very 
little,  if  any,  cheaper  than  in  America,  while  the  accommoda- 
tions are  much  inferior  to  our  own,  and  freight  is  in  a  marked 
degree  higher  than  at  home. 

In  our  own  country  we  have  never  been  able  to  build  our 
public  buildings  as  cheap  as  could  be  done  by  private  contract. 
On  the  contrary,  we  have  been  obliged  to  pay  from  one-fourth 
to  one-third  more,  even  where  disgraceful  and  dishonest  graft 
has  not  increased  the  price,  as  often  and  too  frequently  is  the 
unfortunate  result.  Even  our  municipal  ownership  of  public 
utilities,  in  which,  if  any  anywhere,  we  ought  to  succeed,  has 
been  unsatisfactory  and  a  disappointment  to  all,  and  the  learned 
English  Mayor  who  recently  visited  our  country  passes  judg- 
ment upon  our  city  governments,  condemning  the  attempt  at 
municipal  ownership  under  conditions  as  they  now  exist. 

We  must,  then,  as  citizens,  appeal  to  Congress  and  to  the  leg- 
islatures of  our  States  to  give  us  speedy  and  immediate  remedy 
against  corporate  evils  as  they  now  exist,  by  government  ex- 
amination, government  regulation  and  government  control. 

THE  CHAIRMAN  :  We  are  now  going  to  hear  from  a  gentle- 
man from  one  of  the  original  Yankee  States.  I  have  the  honor 
to  introduce  to  you  now  Hon.  Nahum  J.  Bachelder,  President  of 
the  National  Grange,  whose  home  is  Concord,  N.  H.,  and  whose 
topic  is  "The  Farmers'  Interest  in  Trust  Regulation." 
Hon.  Nahum  J.  Bachelder. 

Mr.  Chairman — As  the  official  head  of  the  National  Grange, 
Patrons  of  Husbandry,  an  organization  with  nearly  one  million 
members,  I  have  had  ample  opportunity  for  learning  the  senti- 
ments of  the  farmers  in  all  sections  of  the  country  regarding  the 
policy  to  be  pursued  in  relation  to  the  great  combinations  of  cap- 
ital commonly  termed  "Trusts."  I  am  convinced  that  an  over- 
whelming majority  of  the  farmers  strongly  favor  the  enforce- 
ment of  legislation  intended  to  prevent  these  Trusts  from  becom- 
ing oppressive  monopolies,  and  the  repeal  of  any  laws  that  tend 
to  enable  these  combinations  to  stifle  competition  and  charge  un- 
reasonable prices  for  their  products  or  services. 

As  the  question  of  the  regulation  of  the  Trusts  under  existing 

140 


laws  will  be  dealt  with  at  length  by  other  members  of  this  Con- 
ference, I  shall  only  say  in  this  connection  that  in  my  opinion 
the  best  interests  of  the  farmers  will  be  furthered  by  such  action 
as  will  prevent  combinations  in  restraint  of  trade,  while  giving 
every  encouragement  to  the  development  of  the  country's  manu- 
facturing, transportation  and  commercial  interests. 

THE  TARIFF  AIDS  THE  TRUST. 

In  taking  up  the  question  of  the  additional  legislation  that  may 
be  needed  to  protect  the  farmers  from  the  exactions  of  the  Trusts, 
it  is  impossible  to  ignore  the  question  of  the  relation  of  our  tariff 
laws  to  these  corporate  monopolies.  There  undoubtedly  exists  a 
widespread  sentiment  among  the  farmers  of  the  country  to  the 
effect  that  the  protective  tariff,  by  restricting  competition,  makes 
it  possible  for  the  Trusts  to  exact  higher  prices  for  their  products. 
And  it  is  believed  that  the  trade  and  manufacturing  conditions 
existing  at  the  time  of  the  adoption  of  the  present  tariff  have  been 
greatly  modified  since  that  time  by  the  development  and  exten- 
sion of  the  principle  of  combination,  so  as  to  create  immense 
corporations  practically  controlling  certain  lines  of  industry. 

PROTECTION   IMPLIES   HOME   COMPETITION. 

The  theory  on  which  all  the  former  arguments  for  a  protective 
tariff  system  were  founded  was,  that  by  giving  protection  to  our 
manufacturing  industries,  domestic  competition  would  be  in- 
creased, and  that  this  competition  could  be  safely  relied  upon  to 
reduce  the  prices  of  commodities,  or  to  prevent  their  being  raised 
above  a  point  that  would  yield  a  reasonable  profit.  The  proposi- 
tion that  the  encouragement  of  home  industry  would  greatly  in- 
crease competitive  production,  and  constantly  tend  to  a  lowering 
of  prices,  was  confidently  maintained  for  many  years  by  all  the 
leading  advocates  of  a  protective  policy. 

Conceding  that  the  protective  principle  has  been  definitely  ac- 
cepted for  this  country,  and  that  this  policy  will  prevail  for  many 
years  to  come,  the  question  now  arises  as  to  whether  the  condi- 
tions under  which  many  of  the  tariff  schedules  were  arranged 
have  not  changed,  so  as  to  require  their  readjustment.  In  so  far 
as  the  farmers  of  the  country  are  concerned,  they  are  complying 
with  the  conditions  under  which  they  are  given  protection  against 
foreign  competing  products.  The  grain  growers,  the  cattle  raisers, 
the  cotton  planters,  and,  in  short,  the  entire  agricultural  classes  of 

141 


the  country,  are  all  producing  competitively,  and  there  is  no  like- 
lihood of  any  change  in  these  conditions. 

COMPETITION  ELIMINATED  BY  COMBINATION. 

In  the  industrial  world,  however,  we  have  seen  during  the  past 
twenty  years  gigantic  combinations  taking  the  place  of  competing 
manufacturing  firms  and  companies,  so  that  in  many  important 
lines  of  industry  goods  are  practically  no  longer  produced  under 
conditions  of  free  competition.  It  is  claimed  that  these  changed 
conditions  are  a  natural  evolution,  corresponding  to  the  develop- 
ment of  the  corporation  or  joint  stock  company  from  the  regime  of 
individual  manufacturers,  and  that  the  tendency  is  in  the  direction 
of  still  greater  combinations.  Whether  this  be  true  or  not,  there 
is  certainly  a  need  for  investigation  as  to  the  relation  of  this  sup- 
pression of  competition  to  tariff  laws  intended  to  promote 
competition. 

Statements  in  regard  to  the  practical  effect  of  the  tariff  in  in- 
creasing the  cost  of  many  staple  articles  produced  by  Trusts 
have  been  frequently  published  in  recent  years,  and  it  is  alleged 
that  in  practically  all  cases  where  a  combination  has  secured  con- 
trol of  an  industry,  the  prices  of  its  products  have  been  fixed 
largely  by  the  cost  of  similar  foreign  products,  duty-paid.  It  is 
also  stated  that  many  Trust  products  are  sold  for  export  at 
prices  materially  lower  than  those  charged  to  domestic  con- 
sumers. If,  as  is  claimed  by  defenders  of  the  policy  of  selling 
to  foreigners  at  lower  prices,  goods  are  often  sold  for  export  at 
less  than  the  cost  of  production,  it  would  seem  that  the  domestic 
consumers  must  be  paying  more  than  reasonable  prices  in  order  to 
cover  the  loss  on  goods  sold  abroad.  As  I  understand  it,  the  pro- 
tective tariff  policy  is  intended  to  encourage  domestic  producers 
by  protecting  them  against  foreign  competition,  and  it  can  hardly 
be  consistent  with  the  purpose  of  that  policy  that  our  people 
should  be  taxed,  in  the  form  of  high  prices,  in  order  to  benefit 
foreigners. 

DOES    TARIFF    PERMIT    FOREIGN     SALES    AT    LOWER    THAN 

DOMESTIC  PRICES? 

The  basis  on  which  a  scientific  tariff  law  is  supposed  to  be 
adjusted  is  that  the  rate  of  duty  on  any  particular  article  shall 
equal  the  difference  between  the  labor  cost  of  producing  such 
article  in  this  country  and  the  cost  of  producing  the  same  article 

142 


in  foreign  countries.  It  is  stated  that  in  many  cases  the  present 
tariff  rates  on  articles  produced  by  Trusts  are  much  higher  than 
is  necessary  to  cover  this  difference  in  labor  cost,  and  that  mate- 
rial reductions  could  be  made  in  the  duties  on  such  articles,  and 
amply  provide  for  liberal  wages  compared  with  wages  abroad, 
enabling  wage-earners  to  maintain  a  high  standard  of  education 
and  living. 

It  is  manifest  that  if  these  criticisms  of  the  existing  tariff  law 
to  which  I  have  referred  are  well  founded,  that  there  are  good 
reasons  for  legislation  that  will  correct  the  evident  defects  of  the 
present  tariff  schedules,  without  injuriously  affecting  our  agri- 
cultural or  manufacturing  industries.  It  is  therefore  highly  im- 
portant that  all  the  facts  in  regard  to  the  operation  of  the  tariff 
should  become  known  beyond  reasonable  doubt,  and  it  is  evident 
that  these  facts  can  be  best  secured  through  a  non-partisan  Tariff 
Commission,  whose  duty  it  shall  be  to  examine  carefully  into  all 
phases  of  the  subject,  and  secure  exact  information  concerning 
all  disputed  points.  This  Commission  should  include  in  its  mem- 
bership representatives  of  the  agricultural,  labor,  manufacturing, 
transportation  and  commercial  interests.  I  believe  that  such  a 
Commission  would  command  the  confidence  of  the  people  of  the 
country,  and  that  its  conclusions,  based  as  they  must  necessarily 
be  on  ascertained  facts,  reached  at  the  earliest  possible  date. 
would  effectually  solve  the  much-discussed  "tariff  question,"  and 
remove  it  permanently  from  the  field  of  partisan  politics. 

URGENT   NEED   OF   SCIENTIFIC  TARIFF   LEGISLATION. 

It  is  often  charged  that  our  tariff  laws  have  not  been  prepared 
in  a  scientific  manner,  that  is,  with  a  full  knowledge  of  all  the 
conditions  to  which  the  rates  of  duty  are  intended  to  apply.  It  is 
true  that  in  considering  tariff  legislation  the  Committee  on  Ways 
and  Means  has,  to  a  certain  extent,  relied  on  expert  assistance, 
but  it  is  claimed  that  the  recommendations  of  these  experts  are 
too  often  set  aside  at  the  request  of  some  selfish  interest.  It  is 
reasonable  to  suppose  that  a  Commission  of  the  character  sug- 
gested would  be  of  such  high  standing  that  its  conclusions  would 
be  accepted  as  authoritative,  and  that  through  its  careful  and  im- 
partial investigation  Congress  would  be  placed  in  possession  of  all 
the  essential  facts  in  relation  to  the  tariff,  so  that  future  legislation 
on  this  subject  can  be  scientific,  and  consistent  with  the  best 
interests  of  the  people  of  the  country  as  a  whole. 

I  move  the  adoption  of  the  following  resolution : 

143 


vX 


"Resolved,  That  we  recommend  to  the  Congress  of  the  United 
States  the  appointment  of  a  permanent  non-partisan  Tariff  Com- 
mission, composed  of  representatives  of  the  agricultural,  labor, 
manufacturing,  transportation  and  commercial  interests  of  the 
country,  whose  duty  shall  be  to  examine  into  all  phases  of  the 
subject  and  secure  exact  information  concerning  all  disputed 
points,  and  report  their  findings  to  Congress  at  the  earliest 
possible  day." 

Mr.  Chairman,  I  desire  that  this  resolution  be  referred  to  the 
Committee  on  Resolutions. 

MR.  THEODORE  MARBURG  (Maryland):  The  gentle- 
man has  omitted  the  professional  class.  We  sometimes  get  more 
impartial  and  quite  as  good  judgment  from  the  men  who  are  not 
directly  interested  in  these  problems  as  you  would  get  from  these 
special  interests  which  the  gentleman  has  named. 

THE  CHAIRMAN :  Do  you  wish  to  make  an  amendment? 

MR.  MARBURG :  I  move  to  amend  the  resolution  by  insert- 
ing after  the  word  "commercial"  the  words  "and  professional." 
There  might  be  some  others  that  you  might  want  to  add  to  that 
list. 

THE  CHAIRMAN:    Do  you  accept  that  amendment? 

MR.  EUGENE  E.  PRUSSING  (Illinois) :  I  would  like  to  in- 
quire whether,  under  the  rules,  the  resolution  will  be  referred  to 
the  committee  without  debate,  because  I  think  there  is  one  class 
omitted  from  that  resolution,  the  suggestion  of  which  I  would  like 
to  make,  and  that  is  the  class  which  has  been  referred  to  by  my 
friend  on  the  left,  the  consumers.  They  were  not  mentioned.  I 
have  been  a  consumer  all  my  life  and  represent  that  class,  and  I 
would  like  to  be  on  that  Commission.  That  has  been  the  trouble 
with  all  our  Tariff  Commissions,  the  great  outside  has  never  been 
represented. 

THE  CHAIRMAN :  The  chair  believes  that  if  this  resolution 
is  referred  to  the  committee  with  the  suggestion  made  that  it  will 
receive  proper  attention,  and  the  maker  of  the  motion  wishes  to 
dispose  of  it  in  that  way.  If  that  is  satisfactory,  the  Chair  will 
rule  that  the  resolution  will  be  referred  to  the  Committee  on 

144 


Resolutions  with  the  suggestion  that  has  been  made  about  the  con- 
sumers and  the  professional  men. 

Before  this  Conference  adjourns,  the  Secretary  has  some  an- 
nouncement to  make. 

SECRETARY  REYNOLDS :  It  is  urgently  requested  that  all 
the  State  delegations  which  have  not  yet  selected  a  representative 
on  the  Committee  on  Resolutions  should  do  so  at  the  earliest 
possible  moment,  and  when  you  have  selected  a  delegate,  will  he 
please  give  his  full  name  and  the  name  of  the  State  he  represents 
to  myself.  The  Committee  ought  to  be  completed  by  to-morrow 
noon  at  the  latest. 

On  motion,  the  Conference  adjourned  until  10  A.  M.  the 
following  day. 


145 


x/ 


Fourth  Session,  October  23,  10  A.  M. 

The  Conference  was  called  to  order  at  10:30  o'clock  A.  M.  by 
Mr.  Brooks  Adams. 

THE  CHAIRMAN :  As  I  received  no  notice  that  I  must  pre- 
side to-day  until  this  morning,  I  have  no  remarks  prepared,  as 
I  suppose  the  chairman  should  have,  but  there  is  one  remark  which 
I  have  to  make,  and  it  will  be  very  brief.  We  have  not  come 
here  only  to  discuss.  Now,  discussion  is  an  extremely  good 
thing.  We  have  had  discussion  from  all  points  of  view,  and  I 
suppose  we  shall  have  a  great  many  more  points  of  view,  but 
there  is  one  thing  that  is  much  better  than  discussion,  and  that  is 
concentration — concentration  upon  a  plan.  ^This  country  has  ar- 
rived at  a  point  where  it  is  absolutely  necessary,  in  my  judgment, 
that  the  people  should  fix  upon  some\^finitejriethod  of  admin- 
istration, some  definite  principles  with  relation  to  these  great 
Trusts.  If  we  cannot  surmount  the  administrative  difficulties  as 
between  the  public,  in  its  public  capacity,  and  these  great  Trusts, 
which  are  private,  there  is  no  doubt  in  my  judgment  but  that  this 
country  must  be  wrecked.  Therefore,  the  first  duty  and  the  care 
of  every  citizen  is  to  help  crystalize  opinion  upon  some  definite 
plan.  Short  of  that,  I  do  not  think  that  a  mere  discussion  can 
arrive  at  very  great  results. 

I  would  ask  the  Secretary  to  read  a  communication  which  he 
has  received. 

MR.  REYNOLDS,  Mr.  Chairman  and  Gentlemen,  I  have  a 
communication  from  the  President  of  the  National  Civic  Federa- 
tion, Mr.  August  Belmont. 


146 


23  Nassau  Street, 
New  York,  October  21,   1907. 
Prof.  Nicholas  Murray  Butler, 

Chairman,  Industrial  Economics  Department, 
National  Civic  Federation, 
Studebaker  Hall,  Chicago,  111. 

My  Dear  Sir — Imperative  business  considerations  which  will 
not  permit  postponement  oblige  me  to  remain  in  New  York.  I 
keenly  regret  my  inability  to  be  in  Chicago  on  Tuesday  as  one 
of  the  Committee  of  the  Chamber  of  Commerce  of  my  native 
city,  to  take  part  in  the  deliberations  of  the  conference  on  Trusts 
and  Combinations,  under  the  auspices  of  the  National  Civic 
Federation. 

As  President  of  the  Federation  it  would  have  been  my  privi- 
lege and  an  enviable  honor  to  have  presided  at  the  opening  of  an 
assemblage  so  representative  of  the  best  thought  of  the  United 
States  and  whose  discussions  are  sure  to  be  fruitful  of  im- 
measurable good  to  the  Nation. 

Great  as  is  our  country,  energetic  and  thrifty  as  are  our  people, 
bounteous  and  vast  as  are  our-  resources  and  incomparable  as  is 
our  ability  to  succeed  in  the  lace  of  drawbacks,  we  are  not  proof 
against  the  pernicious  effect  of  unwise  laws  governing  trade,  * 
whether  between  individuals  or  between  aggregations  of  individ- 
uals— i.  e.,  the  corporations. 

If  it  is  necessary  for  the  public  good  to  place  restrictions 
around  the  method  of  conducting  a  corporation's  business,  the 
fundamental  principles  underlying  healthy  trading  should  govern  / 
the  consideration  of  them.  The  question  should  not  be  approached 
in  a  spirit  to  punish  successful  accumulation  of  wealth  upon  the 
assumption  that  wealth  in  the  hands  of  corporations  or  of  individ- 
uals is  necessarily  dangerous  to  the  public  welfare. 

The  President,  in  his  last  message,  called  for  the  amendment  of     / 
the  Sherman  Act. 

Already  the  agitation  has  wrought  antagonism,  arraying  some 
of  the  people  against  all  of  the  corporations.  Governments,  State 
and  National,  have  hastened  to  administer  remedies  to  an  already 
much-treated  patient.  The  patient  staggers  under  the  conflicting 
supervision  of  the  doctors,  and  their  quarrels  point  to  disagree- 
ment, which  in  turn  threatens  our  very  institutions. 

The  corporation  in  the  last  analysis  really  means  the  individual. 
It  is  the  investor  who  must  suffer  in  the  end,  and  the  depositor  as 
well,  for  he  again  is  interested  through  the  Trust  Companies,  the 

147 


Banks,  and  the  Savings  Institutions,  which  are  investors  or  loan 
their  funds  on  the  strength  of  corporate  investments. 

The  ramifications  of  these  vital  questions  touch  the  personal 
welfare  of  a  vast  proportion  of  our  population.  An  intelligent 
and  exhaustive  discussion,  therefore,  as  such  must  be  at  this  Con- 
ference, followed  by  timely  recommendations,  will  be  eagerly 
waited  and  watched  for. 

I  am  not  a  pessimist,  and  have  abiding  faith  in  the  ultimate 
triumph  of  the  good  sense  of  the  people  and  the  intelligent  solu- 
tion of  all  the  vexing  questions  surrounding  our  economic  growth, 
but  prejudice  and  cant  must  be  set  aside. 

The  successful  corporation  and  individual  are  necessary  and 
beneficent  factors  in  the  life  and  progress  of  a  healthy  and 
wealthy  nation.  ' 

Our  citizens  should  not  be  egged  on  to  array  themselves  in 
classes  one  against  the  other,  to  the  peril  of  weakening  the 
structure  of  free  institutions  and  of  bringing  suffering  to  every 
home  in  the  land.  Although  the  combatants  are  strong  to-day, 
we  should  not  be  misled,  for  the  conflict  will  hurt  all  alike.  All 
are  indissolubly  linked  in  a  common  interest  and  ownership,  and 
the  remedies  must  be  administered  from  that  standpoint,  with  due 
regard  to  sound  economic  considerations.     I  remain, 

Very  truly  yours, 

August  Belmont. 

THE  CHAIRMAN:  I  have  now  the  honor  to  introduce  to 
you  a  gentleman  with  whose  name  you  are  all  familiar.  He  is  a 
gentleman  whose  reputation  stands  so  high  in  his  department 
that  he  needs  no  introduction  from  me.  Prof.  Jenks,  of  Cornell 
University  will  speak  on  the  "Trust  Situation." 
Prof.  Jeremiah  W.  Jenks. 

Mr.  Chairman — The  task  before  me  this  morning  is  simply  to 
sum  up,  as  briefly  as  possible,  the  progress  that  has  been  made 
during  the  last  few  years  in  the  investigation  of  the  questions 
regarding  corporations,  and  to  state  even  more  briefly  two  or 
three  of  the  problems  of  to-day.  Of  course,  I  am  not  taking  the 
responsibility  of  the  opinions  expressed,  but  my  aim  has  been  to 
express  the  opinions,  generally  speaking,  of  all  thoughtful  men 
on  this  subject. 

At  the  time  of  our  first  great  conference  on  trusts,  eight 
years  ago  and  more,  there  was  great  public  excitement  on  the 
subject.     Many  people  feared  that  private  competition  would  be 

148 


practically  abolished  in  all  lines  of  industry;  legislation  was 
pending  in  several  of  the  State  legislatures,  and  the  feeling  of 
apparent  desperation  on  the  part  of  many  persons  was  so  strong 
that  the  conference  felt  the  great  need  was  for  more  light. 

AN  EPITOME  OF  PROGRESS. 

After  that  conference,  for  a  period  of  two  or  three  years,  the 
formation  of  the  great  combinations  of  corporations  continued, 
several  of  the  larger  ones.,  including  the  United  States  Steel  Cor- 
poration, being  formed. 

Now  that  tendency  seems  to  have  been  checked,  probably 
because  the  lines  of  industry  best  adapted  for  such  organizations 
have  been  well  organized.  Since  then,  also,  there  have  been 
many  restraining  acts  by  different  State  legislatures;  many  im- 
portant decisions  in  State  and  Federal  courts  have  been  made; 
there  has  been  time  for  much  commercial  experience.  This, 
then,  is  the  time  to  take  account  of  the  work  that  has  already 
been  accomplished  by  legislative  and  judicial  action  and  by 
business  experience.  This  conference  should  be  able  to  make  a 
positive  and  exact  statement  of  legislation  still  needed. 

I.  V\  ithout  attempting  to  review  all  the  recommendations 
made  then,  or  all  of  the  lessons  which  have  been  learned  since 
that  time,  some  of  the  most  important  may  be  briefly  considered. 

RAILROAD   DISCRIMINATION. 

(a)  The  investigations  of  the  United  States  Industrial  Com- 
mission, of  the  United  States  Bureau  of  Corporations,  and  the 
decisions  of  several  courts,  have  established  beyond  question  the 
fact  that  railroad  discriminations  of  various  kinds  have  been  a 
source  of  very  large  profits  to  most  of  the  important  combina- 
tions, and  have  doubtless  been  a  leading  feature  in  building  up 
their  strength,  even  when  they  have  not  been  a  direct  cause  of 
their  organization.  Even  before  this  fact  had  been  fully  estab- 
lished, laws  had  been  passed  in  several  States  and  by  Congress 
forbidding  such  discriminations  #nd  imposing  a  severe  penalty. 
The  administration  of  these  laws  has  of  late  been  fairly  efficient, 
and  within  the  last  two  or  three  years  especially  there  is  reason 
to  believe  that  this  evil  has  been  at  any  rate  very  greatly  les-v 
sened.  Even  without  further  legislative  action  in  that  direction, 
it  seems  certain  that  time  and  experience  in  administration  will 

149 


enable  these  laws  to  be  progressively  more  efficient  as  the  knowl- 
edge of  conditions  increases. 

(b)  Besides  the  direct  intervention  of  the  courts,  the  Inter- 
state Commerce  Commission  can  now,  under  the  legislation  of 
the  last  Congress,  prescribe  the  method  of  bookkeeping  for  the 
railroads,  and  can  thus  with  much  more  certainty  detect  and 
make  public  any  abuse  contrary  to  law.  This  power  will  doubt- 
less be  exercised  so  as  to  greatly  assist  the  executive,  the  courts 
and  the  public,  to  say  nothing  of  the  consciences  of  railroad 
auditors  and  treasurers. 

INFLUENCE  OF  THE  TARIFF. 

(c)  The  protective  tariff  was  then  declared  by  some  to  be 
the  "mother"  of  all  Trusts ;  by  others  to  have  little  effect  in  cre- 
ating or  in  favoring  the  development  or  prosperity  of  the  com- 
binations. While  this  question  is  still  more  or  less  debatable,  it 
may  be  stated  positively  that  investigations  have  already  shown 
that,  while  the  protective  tariff  cannot  be  said  to  be  directly  the 
cause  of  the  industrial  combinations,  it  has,  doubtless,  in  many 
instances,  protected  some  of  them  from  fierce  foreign  competi- 
tion, and  has  thus  aided  them  decidedly  in  controlling  the 
market  and  in  increasing  prices.  On  the  other  hand,  it  may  be 
stated  with  equal  positiveness  that  other  combinations  have  re- 
ceived practically  no  aid  from  this  source,  and  yet,  without  such 
aid,  have  been  able  to  hold  their  own  against  the  competition  of 
rivals.  There  still  remains  a  very  important  work  to  be  done 
in  the  way  of  investigation  of  the  relation  between  the  protective 
tariff  and  the  industrial  combinations,  but  in  my  personal  judg- 
ment conservative,  remedial  legislation  in  the  way  of  modifica- 
tion of  the  present  tariff  laws  will  prove  to  be  very  desirable. 

EFFECTS  OF  ELIMINATING  COMPETITION. 

2.  The  industrial  combinations,  it  has  been  proved,  have 
many  times  checked  competition  very  decidedly.  They  have 
driven  weak  rivals  to  the  wall,  and  even  without  the  aid  of  tariff 
or  railroad  discriminations  have  attained  a  monopoly  to  so  great 
an  extent  as  to  give  them  for  the  time  being,  within  considerable 
limits,  control  of  the  market  and  the  power  to  fix  prices.  On 
the  other  hand,  experience  has  shown  that  when  they  have  used 
this  power  arbitrarily  they  have  not  stifled  competition.  New 
rivals  have  continually  sprung  up  to  plague  them,  and  the  efforts 

150 


to  abuse  their  power  have  been  costly  to  a  serious  degree.  The 
result  of  this  experience  is  that  many  of  the  stronger,  more  con- 
servative and  more  successful  ol  the  great  combinations  are  no 
longer  reckless  in  their  attempts  to  fix  prices.  Indeed,  unless 
managers  of  the  corporations  are  expecting  to  reap  a  quick 
harvest  on  the  Stock  Exchange  and  then  to  sacrifice  the  interest 
of  their  stockholders,  these  reckless  attempts  to  control  the 
market  prices  of  products  have  been  practically  abandoned.  The 
experience  of  the  last  ten  years  seems  to  show  that  combinations 
will  continue,  but  that  usually  they  will  not  overthrow  competi- 
tion, and  that  the  field  for  their  arbitrary  action  in  fixing  prices 
is  strictly  limited. 

THE  PROBLEM  OF  CAPITALIZATION. 

3.  Long  before  the  time  of  the  last  conference,  overcapitali- 
zation had  been  generally  recognized  as  one  of  the  great  evils  of 
corporate  organization,  an  evil  much  exaggerated  in  the  forma- 
tion of  many  of  the  great  industrial  combinations.  This  evil, 
too,  has  in  part  been  cured  simply  by  business  experience.  In- 
vestors have  become  more  cautious  on  account  of  their  poor 
investments ;  the  bankers  and  underwriters,  from  their  difficul- 
ties in  floating  so  large  amounts  of  "undigested  securities" ;  but 
legislation  also  has  played  its  good  part  in  lessening  this  evil. 
It  seems  now  to  be  generally  recognized  that  effective  means 
can  be  found  of  restricting  capitalization  within  reasonable 
bounds.  In  some  of  the  late  court  decisions,  also,  especially  in 
the  State  of  New  Jersey,  promoters  have  been  held  rigidly  re- 
sponsible for  misrepresentation  in  connection  with  the  organiza- 
tion of  corporations,  and  when  it  has  become  clear  that  some 
persons,  acting  merely  as  "dummy  directors,"  have  overloaded  the 
capitalization  with  worthless  securities,  the  real  culprits  have 
been  held  personally  responsible.  Doubtless  such  decisions, 
even  under  present  legislation,  if  they  are  steadily  followed  up  in 
different  States  and  in  Federal  courts,  will  largely  do  away  with 
the  evil. 

There  still  remains,  however,  to  be  settled  finally  the  sound 
principles  of  just  capitalization.  Shall  the  basis  of  capitalization 
be  a  reasonable  valuation  of  tangible  property,  or  shall  it  be 
considered  just  and  legal  to  capitalize  also  a  reasonable  earning 
power  or  a  good  reputation  under  the  name  of  good  will?  But 
we  must  adequately  forbid  the  capitalization  of  mere  monopo- 

151 


J 


listic  power.  Whatever  the  final  decision  may  be  as  to  the  best 
basis  of  capitalization,  no  one  questions  that  publicity  in  con- 
nection with  promotion  and  the  organization  of  corporations  is 
the  best  general  remedy  for  the  evils  of  overcapitalization. 


PRICE  POLICY  OF  COMBINATIONS. 

4.  Much  also  has  been  learned  regarding  the  effects  of  the 
giant  corporations  upon  various  phases  of  business. 

(a)  The  investigations  of  the  Industrial  Commission  and  of 
the  Bureau  of  Corporations  seem  to  have  made  it  clear  that  very 
many  of  the  claims  of  the  great  corporations  that  they  have 
lowered  prices  on  account  of  the  savings  which  they  have  been 
able  to  effect  are  not  true.  While  it  may  be  granted  that  they 
have  often  had  the  power  to  lower  prices,  in  many  instances 
they  have  also  had  the  power  to  raise  them,  and  especially 
during  the  times  of  most  active  trust  organization,  say  from 
1897  to  1902,  the  result  of  the  organization  of  a  great  combina- 
tion was  in  many,  instances  to  increase  rather  than  to  lower 
prices.  It  is  true  that  in  many  instances  it  was  claimed  that  the 
competition  beforehand  was  so  keen  that  all  the  members  of  the 
combination  were  losing  money,  and  that  the  increase  in  price 
was  merely  enough  to  offset  losses.  Doubtless  certain  instances 
of  this  kind  may  be  found,  but  When  combinations  have  paid 
dividends  of  40  per  cent  or  50  per  cent,  or  even  when  they  have 
paid  dividends  of  only  5  per  cent  and  6  per  cent  on  stock,  three- 
quarters  of  which  at  least  was  water,  and  have  increased  prices, 
there  seems  no  reason  to  question  that  they  have  been  exercising 
unjust  monopolistic  power.  On  the  other  hand — let  us  be  just — 
there  can  be  no  doubt  that  the  combinations  at  times  have 
tended  to  steady  prices,  and  that  in  times  of  exceptional  demand, 
when  under  the  ordinary  competitive  system  prices  would  have 
increased  to  an  unusual  degree,  the  great  combination  holding 
a  dominant  position  in  the  market  has  insisted  upon  keeping 
prices  steady  and,  under  the  circumstances,  reasonably  low.  On 
the  whole,  the  most  conservative  of  these  great  organizations 
are  showing  more  inclination  to  be  conservative  in  the  use  of 
power,  and  to  hold  prices  steady.  Here  again  it  has  been  found 
repeatedly  that  whenever,  either  through  governmental  action 
or  through  a  policy  deliberately  adopted  by  the  corporation 
itself,  there  has  been  full  publicity  regarding  the  affairs  of  the 

152 


corporation,  prices  have  been  kept  much  more  certainly  within 
reasonable  limits* 

There  still  remains  the  question  of  the  price  offered  to  for- 
eign purchasers  as  compared  with  those  at  home.  The  principle 
has  now  been  generally  recognized  by  all  careful  thinkers  on  the 
subject,  as  the  result  of  much  discussion,  that  at  times  a  small 
surplus  stock  or  a  stock  which  has  remained  on  hand  unti!  there 
is  danger  of  it  becoming  unsalable  may,  without  disadvantage 
to  any  one,  be  unloaded  at  low  rates  abroad,  just  as  we  have 
clearing  sales  in  all  our  great  business  houses  from  time  to  time. 
While  some  of  the  corporation  managers  are  ready  to  defend 
the  practice  of  regularly  selling  abroad  at  lower  prices  than  at 
home,  on  the  ground  that  this  is  the  only  way  to  get  the  foreign 
market,  and  that  the  sale  of  these  extra  goods  produces  a 
steadier  home  demand  for  labor  at  good  wages,  this  point  would 
not  be  generally  conceded.  In  fact,  it  seems  probable  that  this 
policy  could  not  be  carried  out  without  the  influence  of  a  tariff 
unduly  protective. 

COMBINATIONS  AND  LABOR  UNIONS  NOT  HOSTILE. 

(b)  The  fear  which  the  laboring  classes,  especially  as  repre- 
sented by  the  great  trades  unions,  formerly  felt  regarding  the 
great  corporations  seems  largely  to  have  passed.  They  now 
realize,  as  the  result  of  experience,  that  their  unions  are  strong 
enough  to  cope  on  fairly  even  terms  with  the  stronger  combina- 
tions, and  more  and  more  it  seems  to  be  the  settled  policy  on 
the  part  of  both  unions  and  combinations  to  make  trade  agree- 
ments and  settle  their  disputes  on  terms  of  equality.  Certain 
governmental  investigations  seem  to  show  that  the  result  of  the 
combinations  has  not  been  on  the  whole  to  lower  wages.  It 
seems  probable  that  the  wage  earners  of  the  higher  classes  and 
those  with  the  lowest  wages  have  both  increased  relatively  in 
number,  while  those  with  low  average  wages  seem  on  the  whole 
to  have  lessened  their  number.  The  trade  unions,  however, 
seem  steadily  to  be  becoming  capable  of  fighting  successfully  the 
cause  of  the  wage  earners,  even  against  the  greater  combina- 
tions. On  the  other  hand,  from  the  point  of  view  of  the  public, 
the  danger  of  a  combination  between  the  corporation  on  the  one 
hand  and  the  laborers  on  the  other  seems  not  to  be  lessening, 
but  rather  to  be  on  the  increase.     The  corporations   can,  ot 

153 


course,  increase  wages  if  they  can  make  the  public  pay  for  this 
increase  in  higher  prices. 

(c)  The  fear  that  all  industry  will  be  so  dominated  by  the 
Trusts  that  the  ambitious  individual  with  small  capital  will  have 
no  opportunity  of  directing  business,  and  that  therefore  personal 
initiative  in  the  business  community  will  be  greatly  weakened, 
seems  likewise  to  have  passed.  It  has  been  recognized  that  even 
in  the  great  corporations  there  is  plenty  of  opportunity,  as  heads 
of  departments,  to  develop  original  views,  which  will  be  well 
paid  for.  Of  still  greater  consequence  is  the  recognition  of  the 
undoubted  fact  that  the  lines  of  industry  which  are  adapted  for 
combinations  on  a  great  scale  are,  relatively  speaking,  only  a 
minor  percentage  of  the  total  industrial  interests  of  the  country. 

5.  The  experience  of  the  last  eight  years  has  thrown  much 
light  on  the  question  of  remedies  for  the  evils  of  the  Trusts. 
Many  experiments  have  been  made,  and  there  seems  now  a 
reasonable  basis  for  some  fairly  well  established  general  con- 
ditions. 

SUPREMACY  OF  LAW  VINDICATED. 

(a)  In  the  first  place,  the  i  upremacy  of  law  has  been  clearly 
established.  Formerly  man);  seemed  to  question  whether  the 
corporation  would  not  so  dominate  our  governments  that  no  re- 
strictive laws  would  be  effective.  Fortunately,  in  both  State 
and  Nation,  men  have  been  found  who  themselves  possessed 
the  dominating  quality  to  a  remarkable  degree,  and  who  to 
strength  of  will  have  joined  integrity  of  character.  It  may  be 
that  some  of  our  laws  have  been  unwise,  though,  too,  some  of 
them  have  been  wise,  but  in  either  event  the  dominating  power 
of  government  over  corporation  has  been  clearly  established. 
Men  no  longer  fear  the  corporations.  Now,  therefore,  their 
good  and  evil  qualities  may  be  discussed  on  their  merits,  and 
men  need  no  longer  in  fear  strike  out  blindly  to  destroy  all 
agreements  for  joint  action  regardless  of  whether  such  agree- 
ments are  good  or  evil. 

DESTRUCTIVE  LAWS  HARMFUL. 

(b)  We  have  had  many  laws  merely  destructive  in  their  nature. 
Experience  shows,  first,  that  these  laws  have  not  been  generally 
and  impartially  enforced.  Had  they  been  so  enforced  in  some 
instances  practically  every  trade  unionist,  every  member  of  a 

154 


grocers'  association,  even  every  clerk  or  salesman  who  agreed 
to  devote  his  business  energies  solely  to  the  interests  of  his  em- 
ployer during  the  period  of  contract,  would  now  be  occupying 
a  felon's  cell.  Usually  such  laws  have  been  ignored  in  small 
places,  and  in  reference  to  smaller  combinations,  and  have  been 
enforced  only  against  some  of  the  larger,  although  quite  possibly 
in  some  instances  at  least,  against  some  of  the  more  grasping 
and  unscrupulous  of  the  combinations.  But  even  when  these 
laws  have  been  enforced  they  have  at  times  led  to  higher  prices 
for  the  consumers  and  in  other  instances,  although  effective  in 
form,  they  have  been  non-effective  in  fact.  Though  the  corpora- 
tions have  nominally  been  dissolved,  practically  their  members 
have  worked  together  as  efficiently  as  before.  It  may  indeed 
be  said  that  this  exaggerated  attack  upon  agreements  of  all 
kinds,  reasonable  and  unreasonable,  has  been  one  factor,  perhaps 
the  most  prominent  factor,  in  driving  together  into  a  rigid,  single 
organization  establishments  that  without  this  pressure  of  an 
unwise  law  would  have  remained  in  great  part  competitive,  al- 
though acting  under  agreements  in  certain  particulars.  People 
who  complain  most  loudly  against  the  concentration  of  our 
railways  and  the  growth  of  our  giant  corporations  have  largely 
to  thank  the  baleful  influence  of  destructive  legislation. 


EFFICACY  OF  REGULATION  ESTABLISHED. 

(c)  The  situation  is  far  different  as  regards  our  regulative 
legislation.  First,  in  both  State  and  Nation,  we  have  secured  in 
many  instances  a  goodly  degree  of  publicity  regarding  the  work 
of  corporations  and  this  publicity  has  had  a  most  decided  effect 
in  the  direction  of  control.  No  sooner  had  the  Bureau  of  Corpor- 
ations exposed  the  unjust  discriminations  in  rates  in  connection 
with  the  transportation  of  petroleum,  than  the  unjust  rates  through- 
out large  sections  of  the  country  were  immediately  changed. 
Even  where  there  was  no  reason  for  believing  them  technically 
illegal,  it  was  sufficient  that  they  appeared  unjust.  Likewise  the 
investigations  of  our  Public  Utilities  Commissions  are  having 
a  similar  effect  on  both  capitalization  and  rates  and  much  more 
in  the  same  direction  is  still  to  be  expected.  We  have  just  begun 
this  form  of  control,  of  our  public  service  corporations.  There 
can  be  little  question  that  an  extension  of  this  system  will  prove 
still  more  fruitful. 

155 


PROBABLE  DEVELOPMENTS  IN  GOVERNMENT  CONTROL. 

But  we  shall  yet  go  further;  under  our  new  laws,  the  Inter- 
state Commerce  Commission  is  showing  clearly  the  conditions 
of  the  railroads,  and  is  studying  with  far  better  opportunities 
the  whole  question  of  the  cost  of  traffic  and  the  reasonableness 
of  rates.  With  the  power  which  it  now  possesses  of  prescribing 
methods  of  bookkeeping  and  of  constant  supervision  of  the 
work  of  the  roads,  there  need  be  no  fear  that  should  occasion 
arise,  the  power  which  the  commission  has  of  fixing  rates  will 
be  unjustly  exercised.  The  presumption  is  that  with  the  public 
in  possession  of  the  facts,  presented  in  such  a  way  that  everyone 
may  judge  of  the  reasonableness  of  the  railways'  actions,  these 
actions  will  probably  be  reasonable  with  little  direct  exercise 
of  power  on  the  part  of  the  commission.  The  great  manu- 
facturing corporations  are  unfortunately  not  yet  under  so  rigid 
control.  The  power,  however,  now  exists  of  securing  informa- 
tion and  only  a  short  time  will  be  needed  to  give  the  public 
the  facts  regarding  them.  Is  it  not  time  that  we  go  further 
and  bring  these  great  corporations  under  control  similar  to 
that  exercised  over  the  railways,  prescribing  in  certain  instances 
where  their  work  is  clearly  interstate  in  its  nature,  a  Federal 
supervision  which  shall  extend  to  methods  of  accounting  and 
publicity  in  all  matters  of  general  public  interest?  This  control 
may  be  secured  either  by  a  Federal  incorporation  or  by  a  Fed- 
eral license  system,  or  by  other  means  which  may  be  devised. 
The  essential  point  is  that  the  Government,  and  so  far  as  seems 
wise,  the  public,  shall  know  just  what  is  done  and  shall  have  the 
power  to  control.  And  with  this  knowledge  and  control  should 
there  not  likewise  be  joined  as  in  the  case  of  the  railways, 
greater  liberty  of  action  so  long  as  that  action  is  reasonable? 
Surely,  now  the  people  have  learned  their  power,  so  that  they 
need  not,  themselves  unreasonable,  forbid  reasonable  action  on 
the  part  of  either  railroads  or  corporations,  but,  holding  in  their 
hands  the  full  power  to  check  all  unreasonable  acts,  give  to 
corporations  the  right  to  make  agreements  which  are  reasonable 
and  in  the  interests  of  the  public. 

MR.  F.  A.  DERTHICK  (Ohio)  :  Mr.  Chairman,  I  was  a 
member  of  the  Committee  on  Rules,  Order  of  Business  and  Or- 
ganization, and  I  do  not  remember  that  there  was  any  time  fixed 
when  resolutions  would  be  in  order  regarding  certain  extraord- 

156 


inary  conditions  in  the  State  of  Ohio  and  in  certain  cities  in  re- 
lation to  the  subject  that  has  just  been  so  ably  presented.  I  came 
here  with  a  resolution  to  introduce  upon  this  particular  problem, 
and  if  it  is  in  order,  inasmuch  as  it  has  been  presented  in  various 
ways  by  various  gentlemen  here,  I  would  be  glad  to  read  a  brief 
resolution,  so  that  it  may  go  into  the  hands  of  the  Committee  on 
Resolutions. 

THE  CHAIRMAN :  Very  well,  sir,  if  you  will  read  your 
resolution  as  briefly  as  possible. 

MR.  DERTHICK:  It  is  brief.  I  should  be  glad  to  have  these 
resolutions  which  I  will  read  referred  to  the  Committee  on  Res- 
olutions, and  I  submit  with  them  an  extract  from  a  law  recently 
enacted  in  Wisconsin.    The  resolutions  are  as  follows : 

Resolved,  That  all  industrial  corporations  contemplating  a  busi- 
ness extending  beyond  the  limits  of  any  one  State  should  obtain 
their  charter  of  incorporation  from  the  general  government,  as 
having  the  control  of  interstate  commerce ;  that  this  charter  should 
£- strictly  define  the  business  to  be  undertaken,  the  safeguards  of 
the  community,  the  power  and  the  responsibility  of  stockholders, 
the  publicity  of  procedure  and  the  form  and  manner  of  taxation. 

2.  That  industrial  corporations  established  by  a  State  should 
have  no  legal  footing  beyond  the  State. 

3.  That  the  conditions  of  production,  so  far  as  affected  by  law, 
should  be  made  as  equal  and  as  uniform  as  possible  in  reference 
to  taxation,  transportation,  patents  and  the  redress  of  injuries. 

4.  That  all  direct  interference  under  the  plea  of  competition 
of  one  man  or  corporation  with  the  business  of  another  man  or 
corporation  should  be  criminal. 

5.  That  the  peaceful  combination  of  workmen  to  settle  the  con- 
ditions and  the  rewards  of  labor  should  be  carefully  protected. 

Extract  from  "Public  Utility  Law"  of  Wisconsin,  approved 
July  9,  1907  : 

Section  1797-9.  The  commission  shall  prescribe  the  forms  of 
all  books,  accounts,  papers  and  records  required  to  be  kept,  and 
every  public  utility  is  required  to  keep  and  render  its  books,  ac- 

157 


counts  and  papers  and  records  accurately  and  faithfully  in  the 
manner  and  form  prescribed  by  the  commission,  and  to  comply 
with  all  directions  of  the  commission  relating  to  such  books,  ac- 
counts, papers  and  records. 

Section  1797-10.  The  commission  shall  cause  to  be  prepared 
suitable  blanks  for  carrying  out  the  purposes  of  this  act,  and 
shall,  when  necessary,  furnish  such  blanks  to  each  public  utility. 

Section  1797-11.  No  public  utility  shall  keep  any  other  books, 
accounts,  papers  or  records  of  the  business  transacted  than  those 
prescribed  or  approved  by  the  commission. 

Section  1797m- 12a.  Each  public  utility  shall  have  an  office  in 
one  of  the  towns,  villages  or  cities  in  this  State  in  which  its  prop- 
erty or  some  part  thereof  is  located,  and  shall  keep  in  said  office 
all  such  books,  accounts,  papers  and  records  as  shall  be  required 
by  the  commission  to  be  kept  within  the  State.  No  books,  ac- 
counts, papers  or  records  required  by  the  commission  to  be  kept 
within  the  State  shall  be  at  any  time  removed  from  the  State  ex- 
cept upon  such  conditions  as  may  be  prescribed  by  the  commission. 

Section  1797111-13.  The  accounts  shall  be  closed  annually  on 
the  30th  day  of  June,  and  a  balance  sheet  of  that  date  promptly 
taken  therefrom  on  or  before  the  1st  day  of  August  following; 
such  balance  sheet,  together  with  such  other  information  as  the 
commission  shall  prescribe,  verified  by  an  officer  of  the  public 
utility,  shall  be  filed  with  the  commission. 

Section  1797111-14.  1.  The  commission  shall  provide  for  the 
examination  and  audit  of  all  accounts,  and  all  items  shall  be  allo- 
cated to  the  accounts  in  the  manner  prescribed  by  the  commission. 

2.  The  agents,  accountants  or  examiners  employed  by  the  com- 
mission shall  have  authority,  under  the  direction  of  the  commis- 
sion, to  inspect  and  examine  any  and  all  books,  accounts,  papers, 
records  and  memoranda  kept  by  such  public  utilities. 

THE  CHAIRMAN :  After  the  close  of  the  papers  this  morn- 
ing an  opportunity  will  be  given  to  offer  resolutions.  I  wish  to 
state  that  the  resolutions  which  are  offered  are  referred,  under 
the  rules,  to  the  committee  without  discussion. 

158 


I  have  now  the  pleasure  of  introducing  to  the  meeting  a  gen- 
tleman whose  name  you  are  probably  very  familiar  with,  but 
whose\  practical  experience  in  finance  cannot  fail  to  be  of  very 
great  interest  to  everybody  who  is  at  all  interested  in  these  ques- 
tions, which  are,  after  all,  great  financial  questions.  I  now  have 
the  pleasure  of  introducing  to  you  Mr.  Isaac  N.  Seligman,  whose 
topic  is  "The  Trust  Problem." 

Mr.  Isaac  N.  Seligman. 
Mr.  Chairman — I  wish,  first  of  all,  to  correct  a  possible  error. 
I  have  been  accosted  this  morning  by  two  or  three  gentlemen  and 
one  lady  as  "Professor  Seligman."  I  am  not  Professor  Seligman. 
The  professor  is  my  brother,  Professor  of  Economics  at  Columbia 
University,  and  he  is  probably  better  versed  than  I  am  on  eco- 
nomic questions.  At  the  same  timeALaiiLprobably,  as  my  friend, 
Mr.  Low,  said,  a  by-product  of  the  economic  forces  as  a  banker. 
However,  I  have  at  considerable  personal  inconvenience  and 
sacrifice,  I  think,  come  from  New  York,  where  the  financial 
horizon  is  not  very  clear,  as  I  felt  it  my  duty  and  pleasure  also 
to  attend  a  conference  of  this  kind.  I  think  it  is  the  duty  of 
all  busy  men  throughout  the  country  to  give  up  a  certain 
amount  of  time,  thought  and  reflection  to  labors  of  this  kind, 
inasmuch  as  it  is  impossible  otherwise  to  shape  legislative 
action  in  a  proper  way  unless  we  give  a  great  deal  of  time 
and  thought  to  it. 
J  The  purpose  of  this  conference  is  the  consideration  of  the 
trust  and  combination  problem,  and  especially  of  the  subject 
of  State  and  Federal  regulation.  A  full  and  free  discussion  of 
the  questions  bearing  on  this  problem  is  timely.  I  am  hopeful 
that  the  discussion  will  shed  light  on  many  of  the  vexed  ques- 
tions and  will  contribute  to  a  better  understanding  of  the  sub- 
ject. If  it  does  not  result  in  a  full  accord  of  views,  as  is  scarcely 
to  be  expected,  it  may  at  all  events  tend  to  the  putting  forward 
of  some  useful  and  constructive  recommendations. 

REASONS  FOR  GROWTH  OF  COMBINATIONS. 

It  will  be  well  to  recall  the  underlying  economic  reasons  for 
the  formation  of  modern  combinations,  and  for  the  sudden  and 
rapid  launching  of  the  so-called  trusts  toward  the  close  of  the 
last  century.  Before  the  formation  of  the  trusts  attempts  had 
been  made  to  combine  the  larger  manufacturing  and  industrial 

159 


plants  by  means  of  agreements,  taking  the  form  of  pools,  and 
sometimes  accompanied  by  a  single  selling  agency.  This  form 
of  combination  was,  however,  found  to  work  unsatisfactorily 
by  reason  of  the  uncertain  character  of  the  agreements,  internal 
jealousies,  and  other  causes.  Moreover,  the  working  arrange- 
ment was  cumbersome  and  not  productive  of  much  advantage 
to  the  participants  of  the  pools.  A  new  and  more  permanent 
device  was  then  suggested  and  brought  into  existence;  namely, 
permanent  pools  or  trusts.  The  trusts  were  expected  to  realize 
the  benefit  of  pools  without  any  of  the  attendant  unsatisfactory 
conditions. 

The  many  failures  of  industrial  concerns  in  1893,  the  fall  in 
values,  the  heavy  reduction  in  prices  of  securities  of  the  strong 
companies,  the  prevailing  lack  of  confidence  and  general  de- 
pression, all  tended  to  prevent  the  formation  and  launching  of 
new  companies  or  new  business  enterprises.  In  1897  a  gradual 
improvement  began,  and  the  industrial  revival  gathered  strength 
in  the  following  years.  New  companies  were  organized,  and 
the  fever  of  speculation  became  rampant  and  contagious.  The 
organizer  or  promoter  entered  the  field,  and  it  was  not  difficult 
for  him  to  form  combinations  of  such  companies  as  had  already 
well  established  business  connections.  The  public  were  in  the 
humor  to  take  these  securities,  and  thus  a  new  and  lucrative 
channel  was  opened  to  the  flotation  of  new  companies.  This 
now  occurred  on  a  large  scale. 

In  the  meantime  the  technical  trusts  had  been  declared  ob- 
noxious to  the  law,  and  in  order  to  avoid  the  difficulties  con- 
nected with  trusts  a  new  method  of  the  so-called  holding 
companies  was  devised,  under  which  form  most  of  the  modern 
trusts  have  incorporated.  The  legal  position  of  the  holding 
company  was  impregnable  from  the  outset,  and  in  default  of 
special  statutory  provisions  directed  against  it  has  remained  so 
ever  since. 

ADVANTAGES  OF  COMBINATIONS. 

The  economic  reasons  for  combining  constituent  companies 
into  one  corporation  are  fairly  well  understood.  They  may  be 
summed  up  as  a  reduction  in  the  cost  of  management,  a  better 
geographical  adjustment  of  the  separate  plants,  a  more  effective, 
and,  therefore,  a  less  expensive  system  of  marketing  the  goods, 
and,  above  all,  an  avoidance  of  ruinous  or  cut-throat  competi- 
tion. 

160 


That  serious  competition  in  many  of  the  trades  had  frequently 
prevented  profits,  and  in  many  cases  forced  firms  to  the  wall,  is 
unquestionably  true.  The  advocates  of  combination  slated  that 
such  competition  might  become  a  serious  commercial  evil,  and 
that  the  cheapening  of  the  article  was  frequently  made  at  the 
expense  of  quality,  the  public  receiving  substantially  no  benefit, 
and  thus  losing  the  chief  advantage  of  competition. 

Moreover,  it  is  undoubtedly  true  that  the  public  is  frequently 
benefited  by  a  system  of  uniform  prices  which  can  be  more 
effectively  maintained  by  large  corporations  as  compared  to  the 
constantly  fluctuating  and  uncertain  prices  continually  modified 
by  the  competition  of  many  smaller  concerns.  This  advantage 
is  most  clearly  evinced  by  the  history  of  the  United  States  Steel 
Corporation,  which  in  the  midst  of  highly  prosperous  times 
has  yielded  but  little  to  the  temptation  of  raising  prices,  and 
which  has  thereby  undoubtedly  contributed  to  the  maintenance 
of  a  stable  price  level. 

I  do  not,  of  course,  wish  to  imply  that  competition  in  general 
is  not  wholesome,  and  that  it  does  not  act  as  a  natural  cor- 
rective;  but  we  have  come  to  learn  that  in  many  cases  com- 
petition is  not  necessarily  advantageous.  This  is  indubitably 
the  fact  in  the  case  of  the  so-called  public  service  corporations, 
for  all  now  realize  that  competing  gas  plants,  water  works, 
street  railways,  electric  light  companies  and  telephones  would 
not  only  be  a  source  of  the  greatest  annoyance  to  the  inhabit- 
ants of  our  larger  cities  owing  to  the  continual  interference  with 
the  streets,  but  that  they  would  be  well-nigh  intolerable.  The 
inconvenience  resulting  from  a  double  system  of  telephones  is 
not  far  to  seek,  nor  is  the  general  transfer  system  which  has 
proven  such  a  boon  to  the  patrons  of  the  street  railway  to  be 
expected  from  separate  competing  companies.  In  the  case  of 
railways  also  we  are  beginning  to  realize  that  the  evils  of  the 
rebate  system  have  been  largely  due  to  competition  between 
railways,  and  that  large  groups  of  lines  are  frequently  able  to 
.Q-ive  better  and  more  equal  service  to  the  community  than  a 
mass  of  small  competing  lines.  This  has  been  the  history  of 
the  development  of  railways  in  every  country  of  the  world,  and 
reliance  upon  competition  as  the  solution  of  the  railway  prob- 
lem has  long  been  abandoned  by  the  European  countries.  The 
same  reasons  which  make  for  greater  stability  of  rates,  where 
the  cut-throat  competition  of  many  smaller  concerns  is  absent, 
apply  to  a  certain  extent  also  to  the  general  industrial  concerns. 

161 


At  all  events,  even  if  competition  continues  to  persist,  competi- 
tion between  the  larger  aggregations  of  capital  is  apt  to  be 
without  those  attendant  disadvantages  which  are  so  character- 
istic of  cut-throat  competition,  and  which  often  sacrifice  indus- 
trial profits  without  giving  to  the  public  the  advantage  of  good 
quality. 

It  is  now  believed  by  a  great  majority  of  the  public  that  as 
the  independent  producer  disappears  and  is  replaced  by  the 
large  combinations  the  stimulus  to  progress  and  to  creative 
ingenuity  is  weakened.  It  must,  however,  not  be  forgotten 
that,  as  business  men  of  experience  have  frequently  pointed 
out,  ability  and  industry  are  more  clearl)  recognized  and  fairly 
dealt  with  in  large  corporations  than  in  smaller  concerns ;  that 
family  connections,  friendship  and  chance  enter  less  largely  as 
controlling  factors  in  the  conduct  of  the  trust,  and  that  the 
opportunity  for  promotion  to  those  who  are  really  worthy  is 
on  the  whole  better. 

Whatever  be  the  relative  advantages  and  disadvantages  of 
combination,  however,  we  cannot  shut  our  eyes  to  the  fact  that 
they  are  an  inevitable  development;  that  they  are  in  keeping 
with  the  greater  complexity  of  modern  industry  and  with  the 
increased  utilization  of  modern  capital  Industrial  combina- 
tions as  such  have  come  to  stay. 

PUBLIC   HOSTILITY   TO   TRUSTS    AND    COMBINATIONS. 

There  can  be  no  doubt  that  of  late  the  attitude  of  the  general 
public  and  of  the  press  has  been  decidedly  hostile  to  combina- 
tions and  trusts.  Without  speaking  of  the  early  movement 
against  railway  combinations,  the  first  comprehensive  Anti-Trust 
Legislation  was  enacted  in  1890  by  the  Fifty-first  Congress.  A 
number  of  States  had  before  that  time  passed  various  inhibitory 
laws,  but,  as  Senator  Sherman  pointed  out  in  speaking  on  his 
bill  in  1890,  the  States  were  unable  to  deal  with  larger  com- 
binations, which  not  only  affected  our  commerce  with  foreign 
nations,  but  also  influenced  trade  and  transportation  among 
several  States.  The  Sherman  Anti-Trust  law  declared  illegal 
any  combination  in  restraint  of  interstate  or  international  trade. 
To  the  extent  to  which  this  law  declared  illegal  any  combination 
in  unreasonable  restraint  of  trade,  it  was  only  the  enactment 
into  law  of  what  had  for  years  been  the  common  law  rule ;  that 
is  to  say,  any  combination  in  unreasonable  restraint  of  trade 

162 


was  always  deemed  to  be  against  public  policy,  and,  therefore, 
illegal,  ^The  decision  of  the  Supreme  Court  of  the  United  States 
in  the  ^Trans-Missouri  rate  case,  however,  declared  that  the 
proper  interpretation  of  the  Sherman  law  was  that  it  prohibited 
not  only  combinations  in  unreasonable  restraint,  but  also  com- 
binations in  reasonable  restraint  of  trade.  This  means  that  no 
two  firms  or  corporations  in  the  same  line  of  business  could 
legally  combine,  whereas,  under  the  old  rule  only  combinations 
which  by  their  magnitude  tended  to  eliminate  all  competition 
from  the  field  were  illegal.  This  interpretation  of  the  Sherman 
law,  Chairman  Knapp,  of  the  Interstate  Commerce  Commission, 
has  recently,  in  a  public  statement,  declared  to  render  it  one  of 
the  moist  mischievous  pieces  of  legislation  enacted  in  this; 
country.  In  the  case  of  railways  it  was  sought  to  prevent 
agreements  which  the  court  itself  held  to  be  advantageous  to 
the  community,  and  which  the  Interstate  Commerce  Commis- 
sion has  declared  to  be  absolutely  indispensable  for  the  con- 
venience of  the  public,  ^e  are  now  beginning  to  realize  that 
the  Sherman  law  was  too  drastic  a  piece  of  legislation.  It  is 
only  of  recent  years  that  a  serious  attempt  has  been  made  to 
apply  the  Sherman  act  in  all  its  rigor  to  industrial  combinations 
as  well.  I  believe  this  to  be  as  great  a  mistake  as  was  the 
effort  to  apply  it  to  the  traffic  agreements  among  the  railways. 
Laws  should  indeed,  as  a  rule,  be  faithfully  executed,  but  it 
must  not  be  forgotten  that  frequently  the  extremity  of  the  law 
is  extremity  of  injustice. 

That  there  are  evils  or  dangers  connected  with  the  trusts  is 
undeniable,  but  the  way  to  remedy  them  is  to  seek  by  appropri- 
ate legislation  to  cure  the  evils  while  maintaining  the  benefits. 
To  seek  to  abolish  trusts  as  such  is  visionary ;  to  seek  to  cure 
some  of  the  evils  of  trusts  is  perfectly  reasonable.  It  is  worthy 
of  note  that  in  no  other  country  of  the  world  is  there  any  such 
statute  as  the  Sherman  law.  Trusts  are  found  in  many  of  the 
European  countries,  notably  in  Germany,  Austria  and  England, 
and,  while  there  is  considerable  legislation  affecting  them,  no 
government  has  made  the  visionary  attempt  to  declare  utterly 
illegal  a  movement  which  they  recognize  as  inevitable. 

THE  EVILS  OF  TRUSTS. 

The  tariff  has  frequently  been  called  the  Mother  of  Trusts, 
and  it  has  been  maintained  that  the  abolition  of  the  tariff  is  the 
most  effectual  weapon  against  the  evils  of  the  trust.    While  it  is 

163 


1/ 


undoubtedly  true  in  my  opinion  that  some  of  the  trusts  are 
partially  dependent  upon  the  tariff,  it  must  not  be  forgotten 
that  the  trust  movement  is  world-wide  in  character;  that  it  is 
found  in  countries  with  a  high  tariff,  like  the  United  States  in 
countries  with  a  moderate  tariff,  like  Germany,  and  in  countries 
with  no  protective  tariff  at  all,  as  in  England.  The  causes  that 
produce  trusts  are  of  a  broader  and  deeper  character,  and  can- 
not be  ascribed  simply  to  the  tariff.  A  revision  of  the  tariff 
would  contribute  only  in  an  exceedingly  slight  degree  to  the 
solution  of  the  trust  problem. 

It  is  for  this  reason,  as  well  as  for  the  fact  that  there  is  no 
immediate  likelihood  of  any  change  in  the  tariff  being  made  at 
present,  that  in  my  opinion  a  discussion  of  the  tariff  can  be 
eliminated,  while  I  personally  believe  that  the  time  has  come 
for  a  fair  and  intelligent  revision  of  the  tariff,  the  country  should 
use  the  utmost  circumspection  in  departing  from  a  system  which, 
on  the  whole,  has  contributed  so  signally  to  the  up-building  of 
its  prosperity.  The  tariff  question  is  a  problem  by  itself  on 
which  much  might  be  said ;  but  the  trust  problem  is  a  separate 
one  and  ought,  in  my  opinion,  to  be  kept  apart  from  the  tariff. 

NATIONAL  LEGISLATION. 

We  arrive  now  at  what  is  probably  the  most  important  ques- 
tion under  discussion,  namely,  as  to  whether  there  should  be 
a  national  incorporation  of  the  holding  companies  known  as 
trusts.  It  appears  to  me  beyond  any  reasonable  doubt  that  a 
national  regulation  of  our  corporations  is  desirable  and  even 
essential.  It  is  desirable  in  the  interests  of  the  corporations 
themselves.  It  is  difficult  to  conceive  of  the  possibility  of 
establishing  any  uniform  intelligent  regulation  of  corporations, 
if  every  State  is  permitted  to  pass  its  own  laws.  It  is  well 
known  that  in  some  States  extended  privileges  are  offered  to 
incorporators  of  companies ;  while  in  others  great  difficulty  is 
encountered. 

Perhaps  the  most  stringent  and  satisfactory  law  that  has 
been  passed  by  any  State  is  the  Massachusetts  Business  Cor- 
poration law  in  1893,  providing  for  publicity  and  for  the  gen- 
eral control  and  supervision  by  the  State  government.  Con- 
sidering, on  the  other  hand,  the  lax  laws  of  New  Jersey, 
Delaware,  West  Virginia  and  other  States,  by  which  these  States 
grant  corporations  privileges  and  rights  at  variance  with  those 
of  each  other's  laws,   the   conclusion  is   forced  upon   us   that 

164 


effective  and  lasting  remedies  can  be  enforced  only  by  the 
National  Government.  It  has  been  truly  said,  "As  commerce 
becomes  wide  in  its  range,  so  must  legislation  proceed  from  a 
source  of  authority  equally  great  and  comprehensive."  With 
the  ever  growing  magnitude  of  our  modern,  commercial  and 
industrial  processes,  the  inactivity  of  the  central  government 
would  leave  some  States  to  attempt  a  regulation  for  which  they 
are  eminently  unfitted,  because  of  the  interstate  character  of 
the  operations.  I  firmly  believe  that  the  granting  of  a  Federal 
franchise  or  license  to  engage  in  interstate  commerce  would 
tend  fully  to  protect  such  companies  as  remained  within  the 
law  and  would  defend  them  from  harassment  by  forty-five 
separate  legislatures. 

PUBLICITY. 

The  question  now  arises  as  to  what  should  be  the  character 
of  this  national  legislation  and  the  conditions  accompanying  the 
Federal  franchise.  I  have  always  advocated  publicity  in  the 
conduct  of  affairs  of  trusts  or  combinations.  Publicity  appears 
to  me  to  be  one  of  the  chief  and  permanent  antidotes.  There 
is  no  reason  why  the  same  policy  which  is  already  applied  to 
savings  banks  and  trust  companies  by  the  States,  and  to  national 
banks  and  railroad  companies  by  the  Federal  Government 
should  not  be  adopted.  This  would  apply  especially  to  the 
filing  and  publication  of  regular  statements  under  fixed  rules 
and  at  stated  periods. 

The  chief  objection  to  the  above  plan  is  the  unwillingness 
of  those  who  manage  our  large  concerns  to  give  the  public 
the  intimate  details  of  their  business.  They  claim  that  the 
only  result  would  be  the  giving  away  of  the  secrets  of  the 
business,  and  thus  the  inviting  of  unnecessary  or  useless  com- 
petition. This  may,  indeed,  be  true  in  certain  instances,  but  I 
cannot  help  believing  that  it  must  be  possible  to  devise  a  form 
of  report  which  would  be  so  framed  as  to  give  to  the  public  all 
that  it  ought  to  know  and  yet  at  the  same  time  not  to  reveal  any 
strictly  business  secrets.  The  extent  to  which  a  corporation 
should  be  required  to  expose  its  affairs  to  the  scrutiny  of  the 
public  need  not  necessarily  be  a  very  detailed  one.  Periodical 
statements  of  capitalization  and  net  earnings,  a  condensed 
balance  sheet,  a  statement  of  orders  on  hand,  and  possibly  a 
few   other   items,   would   probably   furnish   all   the   information 

165 


needed  for  an  intelligent  judgment  of  its  affairs.  What  lias 
been  done  voluntarily  by  the  United  States  Steel  Corporation 
might  be  taken,  perhaps,  as  an  example  of  what  ought  to  be 
made  obligatory  on  all  trusts.  Their  established  policy  of  giv- 
ing monthly,  quarterly  and  annual  statements  to  the  public, 
authenticated  by  chartered  accountants,  has  strongly  appealed 
to  the  judgment  and  confidence  of  the  public,  and  has  done 
much  to  give  the  corporation  its  deservedly  high  reputation. 
What  the  United  States  Steel  Corporation  can  do  in  the  midst 
of  all  the  competition  to  which  it  is  exposed  by  other  large 
companies,  industries  of  a  different  kind  could,  no  doubt,  do  as 
well.  I  do  not  presume  to  make  any  suggestion  as  to  the  exact 
nature  of  the  publicity  to  be  required,  but,  in  my  opinion,  if  the 
affairs  of  our  industrial  corporations  were  subjected  to  scrutiny 
and  examination  as  is  now  the  case  with  the  National  banks, 
there  is  every  likelihood  that  even  if  it  proved  at  first  to  be 
cumbersome  in  its  workings  the  result  would  ultimately  be  as 
beneficial  to  the  honest  corporations  as  to  the  public.  It  has 
even  been  suggested  that  a  Federal  Comptroller  of  Corporations 
should  be  established  in  Washington  in  the  Department  of 
Commerce  and  Labor.  This  appears  to  me  to  be  an  admirable 
suggestion. 

It  is  true,  and  it  will,  in  all  probability,  remain  true,  that 
attempts  to  impose  governmental  regulation  upon  certain  kinds 
of  business  will  always  arouse  opposition — certainly  at  the  be- 
ginning. The  attempt  to  turn  the  light  of  publicity  on  a  com- 
bination that  has  been  making  large  profits  in  the  past  will 
always  be  bitterly  opposed  by  the  managers,  and  even  perhaps 
by  the  security  holders. 

But  the  fact  remains  that  some  wisely  conducted  supervision 
is  advisable,  and  that  the  central  government  is  better  qualified 
to  enact  wise  and  efficient  laws  than  the  several  States. 

Under  a  system  of  reasonable  national  regulation,  I  believe 
that  the  companies  themselves  will  thrive  more  successfully, 
and  that  the  interest  of  the  investor  will  be  more  safeguarded. 

There  remain  the  further  questions: 

First:  To  what  corporations  should  Federal  regulation  be 
applicable,  and, 

Secondly,  what  additional  regulation  beyond  a  reasonable 
publicity  should  be  attempted. 

166 


CHARACTER  OF  THE  CORPORATIONS  SUBJECT  TO  THE  LAW. 

Although  this  point  has  not  been  considered,  so  far  as  I 
know,  1  submit  the  advisability  of  considering  whether  the 
national  regulation  ought  to  apply  to  all  corporations  of  more 
than  a  certain  size  doing  interstate  business.  It  goes  without 
saying  that  the  object  of  Federal  regulation  is  to  deal  primarily 
with  the  trusts  or  holding  companies.  The  question,  however, 
at  once  presents  itself:  What  is  a  trust  or  holding  company? 
Where  are  you  to  draw  the  line  between  a  small  manufacturer 
with  two  separate  plants,  or  a  small  manufacturing  corporation 
into  which  two  still  smaller  companies  have  been  merged,  and 
this  vast  aggregation  known  as  the  trust.  In  legal  form  there 
is  no  sharp  line ;  the  small  business  merges  into  the  large  busi- 
ness by  imperceptible  steps.  Yet  it  is  manifestly  absurd  to 
expect  that  all  the  details  of  the  petty  concerns  be  submitted  to 
the  public.  What  gives  the  public  the  right  to  know  something 
of  the  concerns  of  the  trust  is  the  very  magnitude  of  the  opera- 
tions. Where  the  reason  of  the  rule  falls  away,  the  rule  itself 
ought  to  disappear.  The  attempt  to  apply  a  Federal  law  to  the 
multiplicity  of  small  industrial  undertakings  would  result  in  a 
hopeless  incumbrance  upon  business.  I  should,  therefore,  like 
to  make  the  suggestion  that  the  Federal  law,  if  enacted,  should 
apply  only  to  those  companies  of  more  than  a  certain  size.  The 
criterion  might  either  be  the  amount  of  the  capital  stock  or 
the  amount  of  the  gross  earnings  or  transactions.  If  the 
former  were  selected  I  should  think  that  it  would  not  be  unrea- 
sonable to  say  that  only  those  corporations  with  a  capital  stock 
of  say,  over  a  million  dollars,  should  be  subjected  to  the  law.  ■> 
If  the  latter  were  selected  I  would  suggest  as  the  basis  gross 
actual  earnings  of  say  at  least  one-half  million  dollars,  or  both 
criteria  might  be  adopted.  ""This  would  take  in  all  the  so-called 
trusts  and  a  great  many  more  besides ;  but  that  some  discrim- 
ination ought  to  be  made  I  am  firmly  convinced. 

FURTHER  REGULATIONS. 

The  question  whether  anything  more  than  the  endeavor  to 
secure  publicity  ought  to  be  attempted  is  an  interesting  one. 
It  is  believed  that  the  national  administration  has  been  seriously 
considering  a  proposition  which  is  certainly  novel  in  its  nature 
— namely,  an  attempt  to  prevent  a  trust  from  charging  at  the 
same  time  different  prices  for  the  same  commodity  in  differ- 

167 


ent  localities.  It  is  pointed  out  that  this  reduction  of  price,  at 
particular  times  or  places,  is  a  weapon  utilized  by  the  trust 
unfairly  to  overcome  competition,  and  that  the  price  which  is 
cut  for  the  moment  is  thereupon  put  up  again  after  the  disap- 
pearance of  the  competitor.  It  is  suggested  that  the  present 
Sherman  act  be  so  amended  as  to  make  such  proceedings  a 
criminal  offense.  Such  an  action  does  not  appeal  to  my  judg- 
ment. There  are  many  perfectly  legitimate  reasons  why  it  may 
become  advisable  to  reduce  prices  below  the  nominal  level  at 
certain  places.  A  large  concern  may  desire  to  reduce  an 
excessive  stock  of  goods  in  a  certain  locality  by  auction  sale,  at 
the  same  time  maintaining  the  price  of  the  commodity  at  its 
other  manufacturing  plants  or  salesrooms.  It  would  certainly 
work  hardship  to  many  of  our  large  concerns  to  be  forced  to 
reduce  prices  throughout  the  line,  and  yet  to  prevent  them 
from  making  local  reductions  might  place  them  at  a  great  dis- 
advantage. Now,  if  the  fixing  of  a  different  price  in  different 
places  at  the  same  time  is  sometimes  perfectly  legitimate,  I 
submit  that  it  is  extremely  difficult  to  place  on  the  statute  books 
a  workable  provision  to  prevent  the  use  of  these  measures  in 
order  to  remove  possible  competition.  It  is  precisely  the  same 
situation  which  has  been  created  in  our  courts  in  the  question 
of  speculation.  Everyone  concedes  that  certain  kinds  of  specu- 
lation are  legitimate  and  serve  a  useful  function  in  society,  and 
other  forms  of  speculation  are  illegitimate ;  yet,  it  is  hopeless 
to  attempt  to  draw  a  sharp  line  between  the  legitimate  and 
illegitimate  forms  of  speculation.  The  courts  have  tried  for 
years  to  do  this,  and  they  have  signally  failed  in  the  attempt. 
The  same  would,  in  my  opinion,  be  true  of  the  effort  to  prevent 
a  trust  from  charging  different  prices  at  different  places  for  the 
same  commodity.  It  is  wise  to  make  the  guilty  suffer,  but 
when  it  is  impossible  to  distinguish  between  the  innocent  and 
the  guilty,  it  is  perhaps  still  wiser  to  let  the  guilty  escape  than 
to  make  the  innocent  suffer. 

Of  a  similar  character  is  the  suggestion  that  in  some  way 
the  trusts  must  be  prohibited  from  selling  their  goods  abroad 
at  lower  rates  than  are  charged  for  the  same  goods  at  home. 
It  is  sometimes  claimed  that  this  is  a  result  of  our  tariff  laws, 
and  that  the  practice  could  be  destroyed  by  a  change  in  the 
tariff.  But  here  again  a  closer  acquaintance  with  business 
methods  would  teach  our  critics  that  this  is  at  certain  times  a 
general  practice  of  the  large  exporting  firms  of  all  countries 

168 


whether  they  have  a  protective  tariff  or  not.  It  is,  for  instance, 
a  notorious  fact  that  Free  Trade  England  has  in  past  years 
been  able  to  secure  or  retain  admission  for  its  manufactured 
goods  in  foreign  markets  by  precisely  this  method ;  and  it  has 
frequently  happened  that  the  large  British  industrial  concerns 
have  sold  goods  for  export  at  prices  considerably  below  the 
domestic  price.  Yet  there  was  no  tariff,  and  there  was  no 
trust.  In  other  words,  this  is  under  certain  circumstances  a 
perfectly  legitimate  form  of  ordinary  business  enterprise,  in 
order  to  extend  markets  and  thus  to  increase  materially  their 
prosperity.  It  is  not  peculiar  to  the  trust,  it  is  not  dependent 
upon  the  tariff,  and  the  attempt  to  prevent  this  method  of 
doing  business  which  is  universally  recognized  throughout  the 
civilized  world  would  simply  be  to  put  American  enterprise  at 
a  disadvantage.  The  price  to  the  American  consumer  would 
not  be  lowered  a  whit ;  the  only  result  would  be  that  the  export 
trade  would  be  cut  off,  and  that  the  business  and  the  opportuni- 
ties for  employing  labor  would  be  curtailed. 

CAPITALIZATION. 

There  remains  one  other  point,  namely,  the  attitude  which 
the  Federal  law  should  take  to  the  question  of  capitalization. 
The  question  of  capitalization  in  the  case  of  the  trust  is  one 
that  primarily  affects  the  investing  public.  It  is  only  in  the 
case  of  the  public  service  corporations,  like  railroads,  gas  com- 
panies, etc.,  that  there  could  be  any  question  as  to  a  connection 
between  rates  and  capitalization,  although  even  here  I  think  it 
is  beginning  to  be  understood  that  the  influence  of  capitaliza- 
tion upon  rates  is  a  very  slight  one  indeed.  But  as  our  problem 
is  specifically  that  of  the  industrial  trust  I  shall  not  go  into 
the  broader  question,  but  take  it  for  granted  that  the  alleged 
evils  of  over-capitalization  primarily  affect  the  investor. 

From  this  point  of  view  it  seems  to  me  that  it  is  a  difficult 
proposition  for  the  Government  so  to  regulate  the  capitalization 
of  corporations  as  to  be  in  a  position  fairly  and  intelligently  to 
limit  or  to  restrict  the  issue  of  bonds  or  stock.  So  many  in- 
tricate phases  of  the  problem  will  be  encountered  as  to  make 
the  attempt  hazardous. 

As  I  understand  this  problem,  there  are  two  theories,  each 
of  which  has  a  number  of  advocates.  First,  capitalization  should 
stand  in  some  definite  relation  to  the  actual  amount  invested 

169 


iii  the  enterprise;  and,  second,  capitalization  should  be  based 
on  earning  capacity. 

The  former  theory,  capitalization  according  to  property  in- 
vested, is  substantially  the  Massachusetts  plan.  It  seems  to 
me,  however,  that  it  has  met  with  very  serious  objections.  The 
payment  in  full  of  capital  stock  in  cash  does  not  necessarily 
mean  assets  equal  in  value  to  the  par  value  of  the  shares.  Take 
two  corporations  in  the  same  line  of  business,  starting  with  the 
samle  capital,  in  each  case  fully  paid  in  cash ;  after  a  few  years 
one  corporation  may  have  frittered  away  one-half  of  its  capital 
and  yet  have  outstanding  the  same  par  value  of  shares ;  while 
the  other  may,  by  prudent  management,  have  added  50  per 
cent,  to  its  assets.  In  this  case,  with  the  same  capital  stock 
outstanding  and  fully  paid  in  in  cash,  one  company  would  have 
a  book  value  of  fifty,  while  the  other  would  have  a  book  value 
of  one  hundred  and  fifty. 

Entirely  too  much,  in  my  opinion,  has  been  made  of  over- 
capitalization of  industrial  enterprises.  So  far  as  the  control 
of  capitalization  is  intended  to  safeguard  the  investor,  I  can 
only  record  my  conviction  that  the  judgment  of  the  market  in- 
variably discounts  the  nominal  capitalization  of  the  company. 
If  this  capitalization  is  larger  than  the  facts  warrant,  the  securi- 
ties sell  at  a  discount;  if  smaller,  they  sell  at  a  premium.  The 
actual  basis  of  such  market  valuation  is  not  the  par  value,  nor 
yet  the  actual  assets  of  the  company,  but  it  is  in  every  case 
earning  capacity.  Furthermore,  even  if  we  take  capitalization 
as  based  on  earning  capacity  the  question  will  at  once  arise,  on 
what  basis  shall  the  combination  be  allowed  to  capitalize.  Shall 
it  be  on  a  6  per  cent.,  10  per  cent,  or  still  higher  basis?  The 
character  of  certain  business  industries  differs  so  radically  that 
even  an  expert  would  find  it  well-nigh  hopeless  to  attempt  to 
arrive  at  any  satisfactory  basis  for  a  judgment. 

Moreover,  some  combinations  require  large  working  capital, 
others  a  small  reserve.  Some  combinations  or  manufacturing 
plants  require  large  sums  annually  for  repairs  and  improvements 
—while  others  require  small  amounts.  At  the  present  time  we 
are  hearing  of  the  difficulties  connected  with  the  enforcement  of 
the  uniform  accounting  provision  of  the  interstate  commerce 
law  as  applied  to  railways.  Some  railwavs  charge  more,  others 
less,  to  depreciation  accounts,  etc.,  etc.  If  there  are  these  great 
differences  within  a  single  industry,  like  the  rail  way,  how  much 
greater— nay,  how  insuperable— would  be  the  difficulties  con- 

170 


nected  with  the  attempt  to  make  uniform  rules  for  all  classes  of 
business  industry. 

It  is  interesting  in  this  connection  to  remember  that  two  of 
New  York  City's  eminent  lawyers,  with  a  national  reputation — 
Mr.  Edward  M.  Shepard,  in  an  address  delivered  before  the 
New  Hampshire  Bar  Association,  and  Mr.  Francis  Lynde  Stet- 
son, in  his  testimony  before  the  Industrial  Commission  and 
elsewhere — have  suggested  a  modification  of  the  corporation 
law  so  as  to  permit  a  corporation  to  issue  capital  stock,  each 
share  of  which  shall  represent  a  proportionate  interest  in  the 
enterprise  without  assigning  to  such  share  an  actual  par  value. 
This  would  remove  from  such  shares  the  last  vestige  of  the 
claim  that  the  par  value  holds  out  to  the  public  a  representation 
as  to  the  actual  assets  behind  the  shares.  This  would  mean 
that  if  a  company  were  started  with  10,000  shares,  each  share 
would  be  entitled  to  one  ten-thousandth  part  of  any  sum  dis- 
tributed in  dividends,  or  to  one  ten-thousandth  part  of  the 
assets  of  the  company  in  liquidation.  It  would  mean  that  a 
dividend  would  be  declared  on  such  shares  in  terms  of  so  many 
dollars  per  share  instead  of  in  terms  of  percentage.  There  are 
now  in  this  country  various  unincorporated  organizations,  which 
have  issued  shares  in  the  manner  above  outlined,  such  as,  for 
instance,  the  Massachusetts  Gas  Companies,  which  control  the 
gas  business  in  the  city  of  Boston.  Any  capitalization  in  this 
form  is,  I  believe,  permitted  by  the  laws  of  some  European 
countries.  This  suggestion  seems  to  me  one  worthy  of  at- 
tention. It  may  not  be  entirely  free  from  objections.  I  am  not 
quite  positive  as  to  how  far  it  might  interfere  with  keeping  the 
proper  balance  sheets  of  corporations,  and  it  may  be  that  such 
a  system  would  require  for  its  adoption  a  considerable  change 
in  other  legislation,  as,  for  instance,  in  the  tax  laws  of  those 
States  where  they  still  continue  to  assess  corporations  on  the 
par  value  of  the  capital  stock.  However  this  be,  and  whether 
this  particular  method  of  avoiding  the  alleged  evils  of  over- 
capitalization be  adopted  or  not,  it  appears  to  me  that  any  hard 
and  fast  rule  which  would  limit  the  issuance  of  stock  and  bonds 
by  our  corporations  would  be  apt  to  react  injuriously  upon  our 
general  industrial  condition. 

We  must  be  careful  not  to  pass  any  drastic  legislation  which 
will  hamper  the  initiative  and  the  enterprise  that  'have  made 
the  United  States  so  great.  It  is  indeed  probable  that  the  time 
has  come  for  a  somewhat  more  rigid  application  of  the  Euro- 

171 


pean  methods  in  the  conduct  of  corporations  and  the  responsi- 
bility of  directors.  But  even  here  it  must  not  be  overlooked 
that  every  nation  has  its  own  business  usages  and  conditions, 
and  that  it  is  sometimes  hazardous  to  attempt  to  transplant 
laws  or  institutions. 

EUROPEAN   LEGISLATION. 

It  is  worth  while,  in  this  connection,  to  say  a  few  words  as 
to  the  legal  regulation  of  corporate  enterprise  in  the  country 
which  has  of  late  been  making  the  greatest  advance  in  indus- 
trial progress,  namely,  Germany.  In  Germany  the  corporations 
are  governed  by  two  working  bodies,  the  Directorium  and  the 
Verwaltungsrath,  often  called  Aufsichtsrath.  The  Directorium 
consists  of  the  paid  managers,  while  the  Verwaltungsrath  cor- 
responds to  our  boards  of  directors,  and  has  the  general 
examination  and  supervision,  and  passes  on  the  acts  of 
the  Directorium.  Both  the  Directorium  and  the  Aufsichts- 
rath are  held  specially  liable  for  any  infractions  of  the  law,  as 
well  as  responsible  for  neglect  of  duties.  The  Directorium  and 
the  Aufsichtsrath  both  generally  share  in  the  profits  of  the 
society  which  is  managed  by  them.  The  percentage  of  their 
profits  differs,  according  to  the  by-laws  of  each  company.  To 
cite  an  instance  :  Of  the  profits  of  the  year,  first  of  all,  say,  four 
per  cent,  would  be  distributed  to  shareholders ;  of  the  balance 
of  the  profits,  say  five  per  cent.,  would  be  distributed  to  the 
Directorium,  and  five  per  cent,  to  the  Aufsichtsrath,  and  the 
remaining  ninety  per  cent,  again  to  the  shareholders.  In  im- 
portant companies,  like  the  large  German  steamship  companies, 
the  iron  manufactories,  the  electric  companies,  and  the  impor- 
tant banks,  this  portion  of  the  profit  accruing  to  the  individual 
members  of  the  Aufsichtsrath  is  quite  a  considerable  sum. 
Moreover,  the  system  has  this  advantage,  that  first  of  all,  it 
gives  to  each  member  of  the  board  a  material  interest  in  the 
welfare  of  the  company,  while  with  us  the  material  interest  of 
the  director  is  generally  a  nominal  one.  On  the  other  hand, 
the  Germans,  after  having  thus  distributed  to  the  members  of 
the  Directorium  and  the  Aufsichtsrath  a  liberal  sum,  hold  them 
absolutely  liable  for  any  infraction  of  the  law,  or  for  any  lack 
of  diligence  in  the  fulfilment  of  their  duties.  It  is  a  common 
occurrence  in  Germany  that,  if  a  company  suffers  a  loss  through 
such  fault  of  the  directors,  the  directors  and  the  members  of  the 
Aufsichtsrath  have  to  make  good  the  entire  loss.     Not  infre- 

172 


quently  cases  have  occurred  where  the  directors,  in  order  to 
make  good  such  losses,  were  reduced  to  poverty,  while  others 
were  imprisoned.  The  German  idea  is  that,  if  you  want  to  hold 
a  man  liable,  you  must  pay  him  handsomely,  because  only  then 
have  you  the  right  to  demand  that  he  should  give  his  whole 
attention  and  energies  in  return  for  the  compensation  that  he 
receives.  We,  under  our  present  system,  do  not  pay  our 
directors,  except  by  giving  them  a  paltry  $10  per  meeting,  and 
into  the  bargain  expect  a  stockholder  who  does  work  on  the 
board  to  give  up  many  privileges  and  opportunities  without 
compensation,  while  the  stockholder  who  does  not  work  reaps 
the  fruit  of  the  work  of  the  director  serving  on  the  board,  and, 
besides,  retains  every  privilege. 

It  is  maintained  that  this  system  could  not  be  introduced 
here,  as  it  would  require  business  men  to  devote  themselves 
entirely  to  the  affairs  of  the  company,  and  it  is  claimed,  further- 
more, that  the  German  law  holds  directors  unduly  responsible 
for  any  slight  dereliction  of  duties.  It  is  undoubtedly  true  that 
through  this  enforcement  of  the  lawr  the  security  holders  are 
safeguarded,  although,  here  also  it  is  claimed  that  the  laws  af- 
fecting the  issue  of  securities  are  so  rigid  as  seriously  to  inter- 
fere with  the  formation  of  new  enterprises. 

It  is  interesting  to  note,  however,  that  while  the  German  law- 
is  far  stricter  than  our  law,  with  reference  to  the  financial  man- 
agement of  the  corporations  and  the  responsibility  of  the  di- 
rectors, the  laws  affecting  the  industrial  combinations  or  cartels 
are  far  less  rigid  than  in  this  country  is  the  case  with  the  Anti- 
Trust  law.  The  cartels,  or  species  of  pools  and  selling  arrange- 
ments, are  not  interfered  with  in  Germany.  In  fact,  the  com- 
binations there  have  an  almost  entirely  free  hand  to  do  as  they 
like,  so  far  as  their  relations  to  each  other  or  toward  the  gen- 
eral public  are  concerned.  Germany  realizes  the  fact  that  the 
combinations  are  an  inevitable  concomitant  of  modern  industry, 
and  that  these  large  combinations  have,  on  the  whole,  con- 
tributed materially  to  the  increase  of  German  prosperity.  Oi 
course,  the  fact  that  in  Germany  the  railways  are  owned  by  the 
state  governments,  and  that  therefore  the  whole  question  of 
rebates  is  eliminated,  makes  their  problem  of  dealing  with  the 
trusts  far  less  complicated  than  is  ours.  In  only  one  phase  of 
the  subject  has  Germany  made  any  attempt  to  interfere  with 
the  natural  development  of  large  combinations,  namely,  in  the 
department  stores.    The  Prussian  law7  a  few  years  ago  attempted 

173 


to  prevent  the  crowding  out  of  the  smaller  dealer  by  the  de- 
partment stores  by  imposing  special  and  high  taxes  upon  the 
latter.  This  method  of  dealing  with  the  problem,  however,  has 
been  a  complete  failure,  as  is  now  recognized  by  Germany 
itself.  The  department  stores  have  been  able  to  evade  the  law 
and  they  have  assumed  large  proportions  in  all  the  large  cities. 

CONCLUSIONS. 

We  see,  then,  that  the  treatment  of  the  trust  problem  is  by 
no  means  an  easy  matter.  It  is  believed  by  many  that  the 
action  of  our  government  in  its  desire  to  punish  the  trusts  has 
perhaps  exceeded  its  legitimate  functions.  I  have  now  in  mind 
the  action  of  Attorney-General  Bonaparte  in  bringing  proceed- 
ings of  a  novel  character  against  those  combinations  charged 
with  the  violation  of  the  law,  under  the  provisions  of  the  exist- 
ing statute.  Such  proceedings  are,  in  my  opinion,  exceedingly 
dangerous,  for  the  lightning  is  almost  always  certain  to  strike 
the  wrong  person,  namely,  the  innocent  investor,  rather  than 
those  who  have  transgressed  the  law.  Whether  such  proceed- 
ings, moreover,  can  succeed,  is  exceedingly  problematical. 

The  Anti-Trust  policy  should  not  proceed  faster  than  is  com- 
patible with  public  welfare.  The  investing  public  have  too  much 
interest  in  such  securities  and  the  s'hock  to  business  interests  is 
too  violent.  The  law  should  be  so  modified  as  to  reach  only 
those  who  have  really  committed  a  crime  against  the  well- 
considered  interest  of  the  community  as  a  whole.  The  attempt 
vigorously  to  enforce  a  law  which  is  based  upon  erroneous 
premises  is  bound  not  only  to  fail,  but  in  the  meantime  to  create 
havoc. 

Individually,  I  have  every  confidence  in  the  intention  of  the 
present  Administration  to  act  fairly  and  reasonably  toward 
corporations.  It  is  apparent  that  great  difficulty  is  encoun- 
tered in  bringing  to  justice  those  who  are  guilty.  Let  us,  then, 
amend  the  law  to  meet  the  exigency  rather  than  by  any  ill- 
advised  action  to  steep  the  country  in  financial  chaos  or  to 
embark  on  a  policy  of  general  destruction. 

There  is,  in  my  opinion,  more  danger  to  be  feared  from  the 
ordinary  tendencies  of  the  various  States  than  from  the  present 
National  Administration  or  any  future  National  Administration. 
While  we  may  never  reach  the  ideal  goal,  there  is  every  reason 
to  believe  that,  under  proper  safeguards,  corporations  will  be 
more  secure  under  an  effective  and  reasonable  national  incor- 

i74 


poration  law  than  at  present  under  the  laws  of  the  various 
States. 

We  have  seen  but  lately  our  Southern  friends — firm  and  un- 
wavering advocates  of  State  rights — beseeching  our  National 
Government  to  save  them  from  the  well-nigh  confiscatory  laws 
affecting  railway  rates  passed  by  the  States. 

It  is  true  there  are  many  public  spirited  citizens  and  students 
of  government  who  deplore  what  they  please  to  call  the  inces- 
sant encroachments  of  our  National  Government  on  the  rights 
and  privileges  reserved  to  the  States  by  the  Constitution.  But 
a  dispassionate  study  of  history  will  show  us  that  whenever 
such  controversies  have  arisen  the  results  have  proven  that  the 
central  government  is  better  able  wisely  to  cope  with  such  inter- 
state problems,  and  in  the  end  the  opposition  disappears. 

It  took  nearly  a  century  for  the  country  to  realize  the  neces- 
sity of  a  national  circulating  medium  as  opposed  to  the  State 
currencies  before  the  war;  and  what  has  been  brought  about 
in  the  case  of  the  national  currency  will  surely  also  be  effected 
in  the  case  of  national  industry. 

The  problem  confronting  us  is  not  one  of  State  rights  or  of 
academic  discussion  as  to  the  votaries  of  Jefferson  and  of  Ham- 
ilton. Let  us  be  guided  by  our  experience.  Let  us  remember 
that  our  business  interests  have  become  national  interests,  and 
let  us  have  confidence  in  the  integrity,  wisdom  and  equity  of 
our  Government.  It  appears  to  me,  gentlemen,  that  we  can 
safely  trust  the  present  Administration,  and  that  it  is  our  duty 
to  strengthen  its  hands;  but  we  should  be  recreant  in  our  duty 
if  we  did  not  at  the  same  time  voice  our  honest  opinion,  and 
seek  to  direct  the  action  of  the  Government  in  the  interests  of 
a  well-rounded  economical  progress. 

There  has  been  entirely  too  much  hasty  legislation  affecting 
this  problem.  What  we  need  is  wise,  instead  of  unwise,  legis- 
lation; moderate,  instead  of  radical  legislation.  Let  us  take 
one  step  at  a  time  and  then  if  necessary  proceed  to  the  next 
one. 

The  establishment  of  the  Bureau  of  Corporations  has  done 
much  to  point  out  the  present  dangers  in  our  system.  What 
is  now  needed  is  a  modification  of  the  Sherman  law,  the  repeal 
of  its  drastic  and  unreasonable  provisions  and  their  replace- 
ment by  sections  providing  for  a  reasonable  publicity  and  for 
a  reasonable  regulation  of  all  large  corporations  doing  an  inter- 
state business.    Many  reforms  have  already  been  instituted  and 

i75 


we  need  have  no  misgivings  that  an  Administration  which  has 
accomplished  so  much  will  fail  in  securing  still  more  for  the 
public,  without  jeopardizing  the  business  interests  the  mainte- 
nance of  which  is  so  indispensable  to  political  as  well  as  to 
economic  progress. 

THE  CHAIRMAN:  I  have  to  state,  for  the  benefit  of  the 
audience,  as  the  time  is  somewhat  limited,  that  any  portions  of 
papers  omitted,  on  account  of  shortage  of  time,  at  the  disposal  of 
the  Conference  will  be  printed  in  the  proceedings  so  that  the 
gentlemen  can  read  them.  I  was  extremely  interested  in  listening 
to  the  remarks  of  Mr.  Seligman,  because  in  the  theoretical  expo- 
sition of  the  subject  there  is  something  which  appeals  to  every 
audience  like  this,  in  the  experience  of  men  who  deal  with  these 
subjects  every  day,  who  see  their  practical  side  and  appreciate 
their  practical  difficulty ;  and  in  that  point  of  view  I  think  our 
next  speaker  will  be  extremely  interesting  to  the  audience,  for 
he  is  a  man  who  deals  with  the  practical  side  of  the  legal  diffi- 
culties of  the  situation  we  are  in.  J  have  the  honor  to  introduce 
to  you  Edgar  A.  Bancroft,  of  the  Chicago  Bar,  whose  topic  is 
"Destruction  or  Regulation." 

Mr.  Edgar  A.  Bancroft. 
Mr.  Chairman — The  public  is  interested  in  "trusts"  because 
of  their  effect  upon  prices.  Those  are  deemed  proper  prices 
which  result  from  the  free  play  of  supply  and  demand  with  the 
various  producers  and  consumers  competing  among  themselves. 
The  only  virtue  of  free  competition  is  its  tendency  to  produce 
and  maintain  these  so-called  reasonable  prices.  When  consumers 
sharply  compete  prices  are  increased.  When  producers  are  com- 
peting prices  are  lowered.  The  competition  in  the  one  case  is  as 
important  as  in  the  other,  although  the  results  are  opposite,  and 
those  results  may  be  either  excessive  profits  or  actual  loss.  Pub- 
lic opinion  and  the  laws  approve  these  results,  though  they  pro- 
duce prices  too  high  or  too  low.  But  the  prices  so  produced  are 
deemed  reasonable  prices ;  and  the  same  prices  must  be  reason- 
able, even  though  they  are  the  result  of  restraint  upon  competi- 
tion or  of  monopoly— the  absence  of  competition — and  of  a 
method  that  is  illegal. 
J  Collective   bargaining  seeks   the  double  advantage  of   ending 

itf 


competition  between  the  members  of  the  group,  and  also  of 
unifying  their  competing  power  in  the  market.  On  principle, 
there  is  no  difference  between  collective  bargaining  and  the  cen- 
tralization of  the  implements  or  agencies  of  production.  Every 
modification  or  direction  of  competition  is  a  restraint  of  trade. 
Monopoly  is  a  complete  control  of  the  particular  branch  of 
trade.  The  evil  of  each  is  that  it  tends  toward  unreasonable 
prices  and  oppressive  practices.  But  these  practices  and  these 
prices,  and  not  the  natural  tendency,  are  the  injuries  to  the  pub- 
lic. The  difference  is  fundamental  between  a  tendency  and  its 
exercise — between  evil  impulse  and  evil  action. 

Therefore,  as  to  combinations  and  "trusts,"  the  rational  method 
is  -to  restrain  the  tendency,  forbid  its  exercise,  and  punish  ac- 
tions, instead  of  making  the  tendency  itself  a  capital  offense. 

In  natural  monopolies  and  public  service  corporations  com- 
petition is  neither  essential,  nor  usually  beneficial,  to  the  public 
interests.  And  in  every  case  it  is  a  somewhat  crude  method  of 
preventing  the  owners  of  articles  of  general  necessity  from  de- 
manding unreasonable  prices.  But  these  evils  and  the  abuses  of 
trade  power  can  be  much  more  accurately  and  directly  prevented 
by  defining  and  prohibiting  them,  than  by  condemning  utterly 
all  corporations  and  combinations  capable  of  producing  them;  by 
penalizing  wrong  conduct,  rather  than  destroying  the  capacity 
for  wrongdoing. 

Professor  Jenks's  definition  of  a  ''trust"  is  substantially  ac- 
curate :  "A  corporation  or  a  combination  of  corporations  or  per- 
sons able  to  fix  the  price  of  an  article  of  commerce  independently 
of  competitors."  This  term  is  applied  not  only  to  corporations 
or  combinations  which  are  potential  monopolies,  but  also  to  agree- 
ments which  limit  or  restrain  trade.  The  two  are  entirely  distinct. 
The  first  is  a  "trust"  because  it  has  the  power  to  monopolize, 
whether  it  acts  as  a  monopoly  or  not.  The  second  class  embraces 
acts  rather  than  actors — agreements  for  a  united  action,  though 
they  fall  far  short  of  giving  control  of  the  market  or  of  prices. 

All  laws  thus  far  passed  in  the  United  States  prohibit  both 
classes  of  trusts,  regardless  of  whether  the  corporation  is  guilty 
of  monopolistic  conduct  or  not,  and  whether  the  restraint  of 
trade  is  reasonable  or  oppressive.  Current  popular  opinion  is 
equally  undiscriminating.  It  condemns  the  mere  capacity  for 
monopolizing.  It  prohibits  reasonable,  and  even  beneficial,  re- 
straints upon  competition  equally  with  those  that  are  oppressive. 

Therefore  we  should  determine  at  the  outset  whether  a  large 

177 


corporation  or  an  agreement  in  restraint  of  trade  is  noxious  and 
should  be  suppressed,  even  though  it  in  no  manner  injure  or  op- 
press the  public.  It  is  not  a  sufficient  answer  that  this  is  their 
natural  tendency,  and  that  it  usually  is  followed.  Have  the  large 
corporations  and  trade  agreements  and  combinations,  and  can 
they  have  no  other  effect,  and  no  economic  use  except  to  be 
monopolistic  and  oppressive?  This  is  \he  crux^of  all  discussion 
as  to  what  should  be  done  with  the  trustsT^Has  a  trust,  either  of 
the  one  class  or  of  the  other,  any  economic  value  when  stripped 
of  its  abuses,  and  is  it  capable  of  benefiting  as  well  as  of  harming 
the  public? 

METHODS  OF  DEALING  WITH  TRUSTS. 

There  are  three  methods  of  dealing  with  trusts: 
One  method — which  heretofore  has  had  more  popular  support 
than  any  other — is  to  destroy  them.  Its  advocates  maintain  that 
all  large  corporations  are  objects  of  suspicion,  and  if  they  can 
fix  the  price  of  any  article  of  commerce  in  any  market,  they  are 
prima  facie  illegal,  and  should  be  exterminated ;  and  that  any  con- 
tract or  arrangement  which  restricts  free  and  unlimited  competi- 
tion is  likewise  injurious  and  should  be  prohibited.  This  group 
treats  centralization  of  resources  or  of  manufacturing  or  of  com- 
mercial facilities,  as  equivalent  to  monopolizing,  whether  such 
centralized  organization  functions  as  a  monopoly  or  not.  It 
assumes  that  the  power  for  extortion  will  inevitably  be  exercised, 
and  that  the  only  way  to  prevent  extortion  is  to  destroy  the  power. 
It  admits  no  possibility  of  a  great  centralization  of  capital  and 
resources  refraining  from  extortion  and  oppression,  or  oi  being 
compelled  to  refrain,  or  that  any  mitigation  of  competitive  war- 
fare— even  to  the  extent  of  agreeing  upon  rules  upon  which  the 
war  shall  be  waged,  may  be  beneficial,  or  even  defensible. 

The  second  method  is,  do  nothing.  Its  supporters  point  out 
that  more  "trusts"  have  been  organized  since  they  were  prohib- 
ited by  the  Sherman  law  and  by  the  statutes  of  twenty  (20) 
states,  than  during  the  entire  prior  history  of  our  nation,  if  not 
of  the  world ;  that  all  lines  of  skilled  labor  on  railroads,  and  in 
the  factories  and  offices,  have  not  only  their  own  organizations, 
but  are  federating  for  the  avowed  purpose,  among  others,  of 
raising  their  wages,  reducing  the  hours  of  labor  and  restricting 
competition  between  the  members ;  that  during  the  same  period 
employers  of  labor  have  formed  similar  associations  and  unions 
for  the  like  purpose  of  united  action  instead  of  competitive  action; 

178 


that  the  producers  of  grain  in  one  section,  of  tobacco  in  another, 
and  of  cotton  in  another,  have  formed  similar  organizations  to 
increase  the  prices  to  be  obtained  for  their  respective  products ; 
and  that  all  this  skilful  elimination  of  competition  as  the  general 
law  of  trade  has  gone  steadily  forward,  not  only  in  the  face  of 
these  anti-trust  laws,  but  in  the  face  of  occasional  vigorous  prose- 
cutions. They  point  further  to  the  very  great  benefits  that  have 
resulted  to  the  employes  and  the  agricultural  producers  and  the 
manufacturers  and  the  merchants  from  their  respective  trade 
associations;  the  economies  in  manufacture,  and  the  extensions 
of  trade  both  at  home  and  abroad,  which  were  impossible  to  the 
smaller  manufacturing  unit.  And  from  all  these  facts  the  mem- 
bers of  this  group  have  concluded : 

First — That  combination  and  association  and  co-operation 
among  the  members  of  a  class,  whether  of  skilled  or  unskilled 
laborers,  of  brokers,  commission  agents,  merchants  or  manufac- 
turers, or  controllers  of  capital,  possess  economic  advantages 
which  are  unmistakable,  and  which  make  all  attempts  to  prevent 
such  co-operation  entirely  futile  and  unwise;  that  as  the 
law  under  the  old  competitive  system  permitted  the  free  play 
of  the  competitive  forces  regardless  of  its  wastefulness  and  the 
constant  destruction  of  the  weak  and  the  wounded,  so  now,  when 
that  system  has  been  largely  abandoned,  the  law  should  grant 
equal  freedom  of  action  to  all  the  industrial  and  commercial  forces 
of  society  in  combining  and  co-operating  as  their  interests  may 
seem  to  direct,  and  let  the  fittest  trusts  survive.    And, 

Second — That  while  the  competitive  system  is  in  large  part 
supplanted,  yet  the  law  of  competition  has  not  been  obliterated, 
and  must  ever  be  an  active  restraint  upon  combinations  to  prevent 
he  evils  of  monopoly ;  that,  save  alone  in  the  case  of  natural 
monopolies,  and  in  the  few  instances  where  the  "trust"  has  a 
substantial  monopoly  of  the  raw  materials,  no  monopoly  can  be 
long  maintained  except  on  the  basis  of  furnishing  to  the  public  its 
products  at  a  price  so  low  that  the  profits  will  not  tempt  others 
to  enter  and  compete  in  the  same  market. 

The  third  method  is  regulation.  Its  supporters  recognize,  what 
is  most  obvious,  that  the  irresistible  trend  of  our  time  is  toward 
combination  and  centralization  of  commercial  and  industrial 
forces,  because  of  the  advantages  thereby  secured ;  that  by  reason 
of  these  benefits  it  is  not  only  idle  but  harmful  to  attempt  to  sup- 
press all  combinations  as  such.  But  they  also  recognize  that  with 
these  benefits  there  are   already  very  great   and   very  obvious 

179 


injuries  to  the  public  through  the  abuses  of  the  new-found  powers 
of  combination;  and  that  natural  laws  will  not  correct  them;  that 
those  injuries  may  become  much  greater  if  the  abuses — as  distin- 
guished from  the  powers — are  not  defined,  punished  and  pre- 
vented. They  also  believe  that  quasi-public  corporations  like  the 
railroads  should  be  given  the  amplest  power  of  combination  and 
centralization  in  the  interest  of  greater  efficiency,  but  that  this 
should  be  under  strict  governmental  supervision  and  regulation, 
so  that  the  larger  powers  cannot  be  oppressively  employed.  Al- 
ready this  has  been  accomplished  in  part  by  the  new  Federal  law 
giving  the  Interstate  Commerce  Commission  greater  powers  in 
the  regulation  of  railroads,  and  will  be  completely  accomplished 
when  the  Sherman  law  shall  be  amended  so  as  not  to  apply  to 
railroads,  and  they  are  given  the  power  to  make  pooling  agree- 
ments subject  to  the  approval  and  supervision  of  the  Interstate 
Commerce  Commission. 

Among  the  supporters  of  this  method  are  found  the  great 
majority  of  the  students  of  the  trust  problem.  They  all  agree  on 
the  evils  of  trusts,  trade  associations  and  unions,  and  that  they  are 
evils  of  conduct  and  not  of  mere  capacity  or  origin,  and  differ 
only  as  to  the  extent  and  form  of  governmental  regulation, 

STATUS  OF  PRESENT  LEGISLATION.   % 

In  the  present  condition  of  this  trust  problem  in  America  three 
facts  are  noteworthy:  First,  all  anti-trust  laws  thus  far  passed 
are  aimed  directly  at  the  destruction  of  all  corporations  possess- 
ing the  powers  of  a  monopoly,  and  of  all  combinations  tending, 
in  any  manner,  to  restrain  trade,  while,  at  the  same  time,  no 
prominent  political  leader,  publicist  or  student  advocates  or  de- 
fends this  method ;  second,  that  although  twenty  States,  for  more 
than  fourteen  years,  have  had  drastic  laws  against  monopolies 
and  all  contracts  in  restraint  of  trade,  their  prohibitions  have 
wholly  failed  to  check  the  tendency  of  the  time  toward  combina- 
tion and  co-operation ;  third,  that  although  all  our  leading  writers 
and  scholars  recommend  regulation  and  not  destruction  of  the 
trusts,  and  all  legislation  elsewhere  has  been,  thus  far,  along  this 
line,  no  American  State  has* yet  passed  a  law  attempting  the  reg- 
ulation of  trusts  or  making  any  discrimination  between  reason- 
able and  unreasonable  restraints  of  trade. 

Twenty-eight  States  now  absolutely  prohibit  all  corporations 
with  monopolizing  power,  and  all  contracts  and  combinations 
that  in  anywise  restrain  trade  or  affect  prices.     Many  of  them 

180 


forbid  agreements  to  lozver  prices.  Ten  Slates  impose  fines  only, 
eleven  Stales  add  a  jail  sentence,  and  six  States  make  all  viola- 
tions punishable  by  imprisonment  for  from  one  to  ten  years. 

Under  the  present  Texas  law,  if  a  man  sells  a  gallon  of  oil  as 
the  agent  of  the  Standard  Oil  Company,  he  can  be  imprisoned 
in  the  penitentiary  not  less  than  two  nor  more  than  ten  years. 

LEGISLATION   SHOULD  ATTACK  EVILS. 

At  the  Trust  Conference  of  1899  many  diverse  views  were 
expressed  and  many  remedies  suggested,  but  they  did  not  ob- 
scure, as  these  laws  do,  the  marked  distinction  between  the  evils 
of  monopoly  and  the  mere  power  to  inflict  them.  So  far  as  there 
was  then  a  consensus  of  opinion,  it  was  that  the  evils  themselves 
should  be  attacked  by  prohibiting  the  oppressive  conduct  and  by 
providing  for  publicity,  so  that  misconduct  might  be  easily 
proved. 

While  Mr.  Bryan  was  inclined  to  doubt  the  possibility  of  a 
good  trust,  nevertheless  the  plan  which  he  so  ably  presented  pro- 
vided for  a  Federal  license  which  would  prevent  the  abuses  in- 
stead of  destroying  the  life  of  the  corporation.     He  said : 

"I  do  not  go  so  far  as  some  do  and  say  that  there  shall  be 
no  private  corporations,  but  I  say  this :  That  a  corporation  is 
created  by  law  for  the  public  good,  and  that  it  should  never  be 
permitted  to  do  a  thing  that  is  injurious  to  the  public,  and  that 
if  any  corporation  enjoys  any  privileges  to-day  which  are  hurt- 
ful to  the  public  those  privileges  ought  to  be  withdrawn  from  it. 
In  other  words,  I  am  willing  that  we  should  first  see  whether  we 
can  preserve  the  benefits  of  the  corporation  and  take  from  it  its 
possibilities  for  harm." 

Judge  Howe,  the  permanent  chairman  of  that  conference,  con- 
cluded his  summary  of  suggested  methods  with  these  words : 

"In  short,  we  need  to  frankly  recognize  the  fact  that  trading 
and  industrial  corporations  are  needed  to  organize  the  activities 
of  our  country,  and  that  they  are  not  to  be  scolded  or  belied,  but 
controlled  as  we  control  steam  and  electricity,  which  are  also 
dangerous  if  not  carefully  managed,  but  of  wonderful  usefulness 
if  rightly  harnessed  to  the  car  of  progress." 

The  Industrial  Commission  appointed  by  Congress  in  1898,  in 
its  preliminary  report,  said : 

"Experience  proves  that  industrial  combinations  have  become 
fixtures  in  our  business  life.  Their  power  for  evil  should  be 
destroyed  and  their  means  for  good  preserved." 

181 


President  Roosevelt,  in  his  first  message,  December  3,  1901, 
said: 

"There  is  a  wide-spread  conviction  in  the  minds  of  the  Amer- 
ican people  that  the  great  corporations  known  as  trusts  are,  in 
certain  of  their  features  and  tendencies,  hurtful  to  the  general 
welfare.  *  *  *  It  does  not  rest  upon  a  lack  of  intelligent 
appreciation  of  the  necessity  of  meeting  changing  and  changed 
conditions  of  trade  with  new  methods,  nor  upon  ignorance  of 
the  fact  that  COMBINATION  OF  CAPITAL  IN  THE  EF- 
FORT TO  ACCOMPLISH  GREAT  THINGS  IS  NECES- 
SARY WHEN  THE  WORLD'S  PROGRESS  DEMANDS 
THAT  GREAT  THINGS  BE  DONE.  IT  IS  BASED  UPON 
SINCERE  CONVICTION  THAT  COMBINATION  AND 
CONCENTRATION  SHOULD  BE,  NOT  PROHIBITED, 
BUT  SUPERVISED  AND,  WITHIN  REASONABLE 
LIMITS,  CONTROLLED;  AND  IN  MY  JUDGMENT 
THIS  CONVICTION  IS  RIGHT." 

In  his  message,  December  2,  1902,  he  said : 

"Corporations,  and  especially  combinations  of  corporations, 
should  be  managed  under  public  regulation.  Experience  has 
shown  that  *  *  *  the  necessary  supervision  cannot  be  ob- 
tained by  State  action.  IT  MUST,  THEREFORE,  BE 
ACHIEVED  BY  NATIONAL  ACTION.  OUR  AIM  IS 
NOT  TO  DO  AWAY  WITH  CORPORATIONS;  ON  THE 
CONTRARY,  THESE  BIG  AGGREGATIONS  ARE  AN 
INEVITABLE  DEVELOPMENT  OF  MODERN  INDUS- 
TRIALISM, AND  THE  EFFORT  TO  DESTROY  THEM 
WOULD  BE  FUTILE  UNLESS  ACCOMPLISHED  IN 
WAYS  THAT  WOULD  WORK  THE  UTMOST  MIS- 
CHIEF TO  THE  ENTIRE  BODY  POLITIC.  We  can  do 
nothing  of  good  in  the  way  of  regulating  and  supervising  these 
corporations  until  we  fix  clearly  in  our  minds  that  we  are  not 
attacking  the  corporations,  but  endeavoring  to  do  away  with  any 
evil  in  them.  *  *  *  We  draw  the  line  against  misconduct, 
not  against  ivealth." 

In  his  annual  message  of  December  7,  1903,  he  further  said: 

"We  recognize  that  this  is  an  era  of  federation  and  combina- 
tion, in  which  great  capitalistic  corporations  and  labor  unions 
have  become  factors  of  tremendous  importance  in  all  industrial 
centres.  *  *  *  The  line  as  between  different  corporations, 
as  between  different  unions,  is  drawn  as  it  is  between  different 
individuals;  that  is,  it  is  drawn  on  conduct." 

182 


Iii  his  message  of  December  5,  1905,  the  President  said : 

"Experience  has  shown  conclusively  that  it  is  useless  to  try  to 
get  any  adequate  regulation  and  supervision  of  these  great  cor- 
porations by  State  action.  Such  regulation  and  supervision  can 
only  be  effectively  exercised  by  a  sovereign  whose  jurisdiction 
is  co-extensive  with  the  field  of  work  of  the  corporations;  that 
is,  by  the  National  Government.  *  *  *  It  has  been  a  mis- 
fortune that  the  national  laws  on  this  subject  have  hitherto  been 
of  a  negative  or  prohibitive  rather  than  an  affirmative  kind,  and 
still  more,  that  they  have  sought  in  part  to  prohibit  what  could 
not  be  effectively  prohibited.  *  *  *  It  is  generally  useless 
to  try  to  prohibit  all  restraint  on  competition,  whether  this  re- 
straint be  reasonable  or  unreasonable ;  and  when  it  is  not  useless 
it  is  generally  hurtful.  *  *  *  What  is  needed  is  not  sweep- 
ing prohibition  of  every  arrangement,  good  or  bad,  which  may 
tend  to  restrict  competition,  but  such  adequate  supervision  and 
regulation  as  will  prevent  any  restriction  of  competition  from 
being  to  the  detriment  of  the  public,  as  well  as  *  *  *  pre- 
vent other  abuses  in  no  way  connected  with  restriction  of  com- 
petition." 

And  in  his  last  annual  message,  December  4,  1906,  President 
Roosevelt  said : 

"Our  effort  should  be  not  so  much  to  prevent  consolidation 
as  such,  but  so  to  supervise  and  control  it  as  to  see  that  it  re- 
sults in  no  harm  to  the  people.     *     *     * 

"The  actual  working  of  our  laws  has  shown  that  the  effort  to 
prohibit  all  combination,  good  or  bad.  is  noxious  where  it  is  not 
ineffective.  COMBINATION  OF  CAPITAL,  LIKE  COM- 
BINATION OF  LABOR,  IS  A  NECESSARY  ELEMENT 
OF  OUR  PRESENT  INDUSTRIAL  SYSTEM.  IT  IS  NOT 
POSSIBLE  COMPLETELY  TO  PREVENT  IT;  AND  IF 
IT  WERE  POSSIBLE,  SUCH  COMPLETE  PREVENTION 
WOULD  DO  DAMAGE  TO  THE  BODY  POLITIC" 

And,  finally,  in  his  speech  at  the  Jamestown  Exposition,  April 
7,  1907,  he  said : 

"This  is  an  era  of  combination  alike  in  the  world  of  capital 
and  in  the  world  of  labor.  EACH  KIND  OF  COMBINA- 
TION CAN  DO  GOOD,  AND  YET  EACH,  HOWEVER 
POWERFUL.  MUST  BE  OPPOSED  WHEN  IT  DOES  ILL. 
At  the  moment  the  greatest  problem  before  us  is  how  to  exercise 
such  control  over  the  business  use  of  vast  wealth,  individual,  but 
especially  corporate,  as  will  insure  its  not  being  used  against  the 

183 


interest  of  the  public,  while  yet  permitting  such  ample  legitimate 
profits  as  will  encourage  individual  initiative.  *  *  *  Said 
Burke,  'If  I  cannot  reform  with  equity,  I  will  not  reform  at  all. 
*  *  *  (There  is)  a  State  to  preserve  as  well  as  a  State  to 
reform.'  This  is  the  exact  spirit  in  which  this  country  should 
move  to  the  reform  of  abuses  of  corporate  wealth.  *  *  * 
We  are  unalterably  determined  to  prevent  wrongdoing  in  the 
future ;  we  have  no  intention  of  trying  to  wreak  such  an  indis- 
criminate vengeance  of  wrongs  done  in  the  past  as  would  con- 
found the  innocent  with  the  guilty.  Our  purpose  is  to  build  up 
rather  than  to  tear  down." 

The  unanswerable  argument  against  the  present  policy  of  de- 
structive legislation  is  that  after  a  trial  of  nearly  twenty  years 
it  has  proved  utterly  futile.  More  trusts  have  been  organized, 
more  important  combinations  of  resources — mercantile  and  man- 
ufacturing— and  more  trade  associations  have  been  formed, 
more  progress  has  been  made  toward  co-operation  as  a  substitute 
for  competition,  during  the  past  dozen  years  than  during  our 
entire  previous  history. 

As  Professor  Jenks,  the  historian  of  the  former  conference 
(and  probably  the  foremost  student  of  the  problem),  has  said: 

"A  study  of  these  (anti-trust)  statutes  and  of  the  decisions  of 
our  courts  of  last  resort,  which  have  been  made  under  them,  will 
show  that  they  have  had  comparatively  little,  practically  no,  ef- 
fect as  regards  the  trend  of  our  industrial  development." 

Upon  the  radical  questions  of  destruction  or  regulation  noth- 
ing can  be  added  to  the  vigorous  and  clear  language  of  President 
Roosevelt  already  quoted.  He  has  clearly  indicated  the  harm 
and  futility  of  attempted  destruction,  and  the  advantages  of  reg- 
ulation. And  it  must  be  Federal  regulation.  State  statutes  are 
wholly  inadequate.  They  touch  only  a  small  part  of  the  field, 
and  they  cannot  even  control  that  small  part  when  the  business 
is  conducted  from  beyond  State  lines. 


WHAT  A  NATIONAL  LAW  SHOULD  INCLUDE. 

Only  a  national  law  can  meet  present  conditions.  The  power 
of  the  Federal  Government  to  regulate  and  control  corporations 
engaged  in  interstate  commerce  is  not  doubtful.  The  commerce 
clause  covers  these  agencies  of  commerce,  as  well  as  its  vehicles 
—the  railroads.  Such  a  law  should  define  and  penalize  the  evils 
of  trusts  and  combinations,  and  provide  a  better  method  of  pub- 

184 


licity,  by  which  both  the  past  history  of  an  organization  and  also 
its  present  conduct  and  future  purposes  may  be  fully  known. 

Instead  of  having  only  the  penalties  of  fines  and  corporate 
extinguishment  aimed  against  the  organization  or  agreement,  re- 
gardless of  its  acts  or  results,  the  law  should  define  the  offense 
in  terms  that  exclude  mere  methods  of  combining,  and  should 
include  all  the  abuses  of  corporate  centralization — all  the  evils  of 
restraining  trade,  and  adequately  provide  for  their  correction 
and  prevention.  The  law  should  sharply  distinguish  between  in- 
cidental and  proper  trade  regulations  and  agreements,  and  those 
which  directly  do,  or  are  designed  to,  increase  prices,  or  other- 
wise injure  competitors  or  the  public. 

TRUST   EVILS   CAPABLE   OF   DEFINITION. 

The  well-known  evils  of  the  trusts  are  not  impossible  of  defini- 
tion in  a  statute  any  more  than  in  popular  discussion.  They  are 
over-capitalization,  secrecy  as  to  methods  for  the  benefit  of  the 
managing  officers,  bad  or  fraudulent  methods  of  bookkeeping  to 
hide  the  real  facts,  injuries  to  the  consumer  by  exorbitant  prices, 
and  to  competitors  by  unfair  methods  of  competition  and  unduly 
low  prices  in  particular  localities — injuries  to  wage  earners  by 
arbitrary  lockouts,  and  to  the  sellers  of  raw  material  by  con- 
trolling the  demand.  Besides  these  are  the  injuries  to  the  pub- 
lic through  giving,  or  seeking  to  obtain,  special  privileges  or  re- 
bates ;  discriminations  against  or  in  favor  of  certain  customers  or 
localities,  and  interference  with  the  ordinary  course  of  legislation 
and  the  enforcement  of  the  laws. 

A  corporation  which  does  none  of  these  things  cannot  prop- 
erly be  put  under  the  ban  of  the  law.  And  the  laws  that  now 
indiscriminately  aim  their  penalties  against  all  forms  of  com- 
bination and  all  corporate  consolidations,  whether  they  benefit 
or  injure  the  public,  have  been,  and  always  will  be,  dead  letters. 
Their  occasional  enforcement  but  illustrates  their  injustice,  and 
their  constant  menace  to  honest  business  methods,  and  their  con- 
stant temptation  to  blackmail  on  the  part  of  dishonest  officials. 

PRINCIPLES   OF   AUSTRALIAN   LEGISLATION. 

The  recent  Australian  Industries  Preservation  Act  of  1906 
clearly  indicates  the  difference  between  our  method  and  a 
rational  method  of  dealing  with  the  trust  question.  That  Act 
seeks,  in  specific  terms,  (1)  the  repression  of  monopolies;  (2)  the 

18s 


prevention  of  dumping;  that  is,  the  importation  of  surplus  ma- 
terials from  other  nations  and  its  sale  at  such  reduced  prices  as 
to  demoralize  the  home  market  for  similar  goods. 

The  act  makes  plain  the  distinction  between  monopolizing  and 
the  power  to  monopolize,  and  between  reasonable  and  unreason- 
able restraints  of  trade.  It  is  obviously  framed  upon  the  Sher- 
man Act,  but  is  so  changed  as  to  define  and  condemn  only  in- 
jurious and  oppressive  combinations  and  contracts  in  restraint  of 
trade.  There  can  be  no  offense  where  there  is  no  intent  to  injure 
the  public,  or  to  injure  competitors  by  unfair  competition.  (*) 

Unfair  competition  is  thus  defined: 

"Unfair  competition  means  competition  which  is  unfair  in  the 
circumstances;  and  in  the  following  cases  the  competition  shall 
be  deemed  to  be  unfair  unless  the  contrary  is  proved : 

"(a)   If  the  defendant  is  a  Commercial  Trust.  (2) 

"(b)  If  the  competition  would  probably,  or  does  in  fact,  re- 
sult in  an  inadequate  remuneration  for  labor  in  the  Australian 
industry. 

"(c)  If  the  competition  would  probably,  or  does  in  fact,  re- 
sult in  creating  substantial  disorganization  in  Australian  industry 
or  throwing  workers  out  of  employment. 

"(d)  If  the  defendant,  with  respect  to  any  goods  or  services 
which  are  the  subject  of  the  competition,  gives,  offers  or  prom- 


(i)  It  provides,  as  to  combinations: 

"i.  Any  person  who,  either  as  principal  or  agent,  makes  or  enters 
into  any  contract,  or  is  or  continues  to  be  a  member  of  or  engages  in  any 
combination,  in  relation  to  trade  or  commerce  with  other  countries  or 
among  the  States — 

"(a)  With  intent  to  restrain  trade  or  commerce  to  the  detriment  of 
the  public;  or 

"(b)  With  intent  to  destroy  or  injure  by  means  of  unfair  competition 
any  Australian  industry,  the  preservation  of  which  is  advantageous  to 
the  Commonwealth,  having  due  regard  to  the  interests  of  producers, 
workers  and  consumers,  is  guilty  of  an  offense.  Penalty,  five  hundred 
pounds. 

"2.  Every  contract  made  or  entered  into  in  contravention  of  this  sec- 
tion shall  be  absolutely  illegal  and  void." 

There  is  precisely  the  same  provision  as  to  "Any  foreign  corporation, 
or  trading  or  financial  corporation,  formed  within  the  Commonwealth." 

(2)  A  "Commercial  Trust"  is  thus  defined: 

"  'Commercial  Trust'  includes  a  combination,  whether  wholly  or  partly 
within  or  beyond  Australia,  of  separate  and  independent  persons  (cor- 
porate or  unincorporate),  whose  voting  power  or  determinations  are 
controlled  or  controllable  by — 

"(a)  The  creation  of  a  trust  as  understood  in  equity,  or  of  a  corpora- 

186 


ises  to  any  person  any  rebate,  refund,  discount  or  reward  upon 
condition  that  that  person  deals,  or  in  consideration  of  that  per- 
son having  dealt,  with  the  defendant  to  the  exclusion  of  other 
persons  dealing  in  similar  goods  or  services. 

"In  determining  whether  the  competition  is  unfair,  regard 
shall  be  had  to  the  management,  the  processes,  the  plant  and  the 
machinery  employed  or  adopted  in  the  Australian  industry  af- 
fected by  the  competition  being  reasonably  efficient,  effective  and 
up  to  date." 

As  to  monopoly,  it  provides  that  any  foreign  corporation  or 
domestic  trading  or  financial  corporation  that — 

"Monopolizes  or  attempts  to  monopolize,  or  combines  or  con- 
spires with  any  person  to  monopolize,  any  part  of  the  trade  or 
commerce  within  the  Commonwealth.  *  *  *  Penalty,  five 
hundred  pounds." 

The  act  provides  that  the  Attorney-General  may  begin  pro- 
ceedings for  an  injunction — 

"After  hearing  and  determining  the  merits,  and  not  by  way  of 
interlocutory  order,  the  carrying  out  of  any  contract  made  or 
entered  into  after  the  commencement  of  this  act,  or  any  com- 
bination which — 

"(a)  Is  in  restraint  of  trade  or  commerce  to  the  detriment  of 
the  public;  or 

"(b)  Is  destructive  or  injurious,  by  means  of  unfair  competi- 
tion, to  any  Australian  industry,  the  preservation  of  which  is 
advantageous  to  the  Commonwealth,  having  due  regard  to  the 
interests  of  producers,  workers  and  consumers/' 

It  also  provides  for  an  injunction  to  prevent  a  repetition  of  a 
violation  of  the  act  after  conviction. 

It  also  contains  the  entirely  novel,  but  reasonable,  provision 
by  which  a  party  to  a  contract  or  combination  which  he  believes 
to  be  lawful  may  submit  it  to  the  Attorney-General  and  be  guilt- 
less until  the  Attorney-General  informs  him  that  the  contract  or 
combination  is  illegal.  (3) 

tion,   wherein  the   trustees   or   corporation   hold   the   interests,   shares   or 

stock  of  the  constituent  persons ;  or 
"(b)  An  agreement;  or 

"(c)  The  creation  of  a  board  of  management  or  its  equivalent;  or 
"(d)   Some  similar  means;  and  includes  any  division,  part,  constituent 

person  or  agent  of  a  'Commercial  Trust.'" 

(3)  "1.  Any  person  party  to  a  contract  or  member  of  a  combina- 
tion, or  in  any  way  concerned  in  carrying  out  the  contract  or  the  objects 
of  the  combination  may — 

187 


By  this  provision  an  honest  business  man  is  enabled  to  protect 
himself  against  criminal  prosecution  for  actions  which  he  takes 
in  absolute  good  faith  and  without  any  purpose  to  violate  the  law 
or  injure  the  public  or  his  competitors. 

DEFECTS  OF  AMERICAN  LEGISLATION. 

This  act  is  in  striking  contrast  with  the  Federal  and  State 
laws,  under  which  a  very  large  portion  of  the  honorable  business 
men  of  the  country  are  liable  at  any  moment  to  be  criminally 
prosecuted  for  violating  anti-trust  laws,  merely  because  such 
laws  denounce,  as  criminal,  acts  which  are  entirely  innocent  and 
harmless,  and  which  have  no  element  of  wrong-doing  in  them  ex- 
cept as  they  are  made  wrongful  by  the  sweeping  and  indiscrim- 


"(a)  Lodge  with  the  Attorney-General  a  statutory  declaration  by  him- 
self, or  in  the  case  of  a  corporation  by  some  one  approved  of  in  that 
hehalf  by  the  Attorney-General,  setting  forth  truly,  fully  and  completely 
the  terms  and  particulars  of  the  contract,  or  the  purposes,  objects  and 
terms  of  agreement,  or  constitution  of  the  combination,  as  the  case  may 
be,  and  an  address  in  Australia  to  which  notices  may  be  sent  by  the 
Attorney-General ;  and 

"(b)    Publish  the  statutory  declaration  in  the  Gazette. 

"2.  The  Attorney-General  may  at  any  time  send  notice  to  the  person 
above  mentioned  (hereinafter  called  the  declarant),  to  the  address  men- 
tioned in  the  statutory  declaration,  that  he  considers  the  contract  or  com- 
bination likely  to  restrain  trade  or  commerce  to  the  detriment  of  the 
public,  or  to  destroy  or  injure  an  Australian  industry  by  unfair  com- 
petition. 

"3.  In  any  proceeding  against  the  declarant  in  respect  of  any  offense 
against  Section  4  or  Section  5  of  this  act,  alleged  to  have  been  commit- 
ted by  him  in  relation  to  the  contract  or  combination  after  the  time  the 
statutory  declaration  has  been  lodged  and  published,  and  before  any 
notice,  as  aforesaid,  has  been  sent  to  him  by  the  Attorney-General,  it 
shall  be  deemed  (but  as  regards  the  declarant  only  and  not  as  regards 
any  other  persons)  that  the  declarant  had  no  intent  to  contravene  the 
provisions  of  the  section,  if  he  proves  that  the  statutory  declaration  con- 
tains a  full  and  complete  statement  of  the  terms  and  particulars  of  the 
contract,  or  Uie  purposes,  objects  and  terms  of  agreement  or  constitution 
of  the  combination,  as  the  case  may  be,  at  the  date  of  the  statutory  dec- 
laration and  at  the  date  of  the  alleged  offense." 

And  thereupon  the  Attorney-General  may,  at  any  time,  notify  such 
declarant  that  he  considers  such  contract  or  combination  obnoxious  to 
the  provisions  of  the  act,  and  that,  in  case  of  any  proceeding  against  the 
declarant  for  violation  of  the  provisions  of  the  act,  it  shall  be  deemed 
that  from  and  after  the  time  of  giving  and  publishing  such  statutory 
declaration  the  declarant  had  no  intent  to  violate  the  act,  if  he  proves 
that  such  declaration  contained  a  full  and  true  statement  of  the  particu- 
lars of  the  contract  or  combination. 

188 


inate  prohibitions  of  these  statutes.  Take  the  familiar  case  of 
an  individual  or  a  corporation  selling  out  its  business  and  good- 
will. It  is  an  essential  part  of  such  business  that  the  seller 
should  not  at  once  re-engage  in  the  same  line  of  business  in  the 
same  locality ;  otherwise  the  business  as  a  going  concern  is  not 
sold,  and  the  vendee  does  not  receive  the  good-will  which  he  pays 
for.  Such  contracts  have  always  been  legal  because  always  rea- 
sonable and  necessary,  and  not  against  the  interests  of  the  public. 
No  person  could  sell  or  buy  a  news  route,  or  milk  route,  or  any 
line  of  business  which  has  been  established  by  the  personal  ef- 
forts of  the  vendor,  without  an  understanding  or  contract  keep- 
ing the  vendor  from  continuing  in  the  business  which  he  sells. 
These  laws  are  not  definite,  or  frank,  or  reasonable,  or  fair. 
Therefore  they  are  enforced  only  in  exceptional  cases,  and  they 
utterly  fail  to  accomplish  their  purpose.  A  general  and  strict 
enforcement  of  them  is  impossible,  and  has  never  been  at- 
tempted. If  their  enforcement  were  attempted  in  good  faith 
against  all  persons  violating  their  letter,  either  juries  would  dis- 
regard the  laws,  or  else  the  legislatures  would  promptly  repeal 
them. 

This  is  the  only  rational  solution  of  the  trust  problem.  It  is 
not  destructive,  but  preservative,  and  demands,  in  the  language 
of  Professor  Clark,  "that  we  do  not  kill  the  industrial  monsters 
which  threaten  and  injure  us,  but  tame  them  and  convert  them 
into  useful  service."  When  the  law  compels  the  trusts  to  "cease 
to  do  evil,"  they  will  very  quickly  "learn  to  do  good ;"  but  they 
will  never  surrender  their  corporate  lives  at  the  demand  of  the 
law,  and  their  general  destruction  by  the  law  is  impossible. 

As  Mr.  Justice  Brown  said:  (4) 

"A  corporation  is,  after  all,  but  an  association  of  individuals 
under  an  assumed  name  and  with  a  distinct  legal  entity.  In  or- 
ganizing itself  as  a  collective  body  it  waives  no  constitutional 
immunities  appropriate  to  such  body.  Its  property  cannot  be 
taken  without  compensation.  It  can  only  be  proceeded  against 
by  due  process  of  law,  and  is  protected,  under  the  Fourteenth 
Amendment,  against  unlawful  discrimination.  *  *  *  Cor- 
porations are  a  necessary  feature  of  modern  business  activity, 
and  their  aggregated  capital  has  become  the  source  of  nearly  all 
great  enterprises." 


(4)  Hale  v.  llcukcl,  201  U.  S.  43,  76. 

189 


THE  NEXT  STEP. 

Whether  Federal  regulation  shall  take  the  form  of  a  general 
incorporation  law,  or  of  a  voluntary — or  compulsory — Federal 
license,  there  is  not  now  time  to  consider.  Regulation  in  that 
form  is,  in  any  event,  the  second  step.  The  first  step  is  a  law 
that  will  define  and  prohibit  all  the  injurious  features  and 
methods  of  trusts,  and  provide  a  complete  and  supervised  pub- 
licity as  to  their  organization  and  conduct.  Such  a  law,  fully 
enforced,  will  accomplish  more  than  has  been  done  by  two  decades 
of  destructive  laws,  and  may  render  their  further  Federal  regu- 
lation unnecessary.  Experience  under  such  a  law  will  furnish 
the  best  guide  as  to  the  extent  and  character  of  the  additional 
Federal  control  required. 

THE  CHAIRMAN :  A  good  many  years  ago  I  first  had  the 
pleasure  of  meeting  Professor  Irving  Fisher.  I  was  then  in- 
troduced to  him  as  the  youngest  professor  in  his  branch  in  the 
United  States.  Notwithstanding  his  youth,  I  remember  that  he 
read  one  of  the  most  interesting  papers  that  evening.  I  have  no 
doubt  that  Professor  Fisher's  capacity  has  not  decreased  with 
his  years  and  that  we  shall  have  one  of  the  most  interesting 
papers  of  this  meeting  from  him.  I  have  the  honor  of  introduc- 
ing to  you  Professor  Irving  Fisher,  who  will  speak  upon  "Over 
Capitalization." 

Prof.  Irving  Fisher. 

Mr.  Chairman — The  question  of  capitalization  has  been  so  thor- 
oughly thrashed  over  that  I  think  there  is  very  little  I  could  add 
of  value,  especially  for  this  audience.  Most  of  you  must  have 
given  the  subject  quite  as  much,  if  not  more,  attention  than  my- 
self, and  the  remarks  that  have  already  been  made  about  it  this 
morning  by  Prof.  Jenks  and  Mr.  Seligman,  will  save  me  the 
trouble  of  making,  and  you  of  listening  to,  a  long  address.  The 
general  public,  however,  I  think,  still  needs  a  good  education  on 
this  problem. 

IS  OVER-CAPITALIZATION  AN  ESSENTIAL  PROBLEM? 

Judging  from  what  is  said  in  the  newspapers,  the  public  view 
tends  to  go  to  one  of  two  extremes :  Either  over-capitalization  is 
responsible  for  almost  all  the  ills  of  trusts  and  combinations,  or  it 
is  regarded  as  responsible  for  almost  none  of  them.  On  the  other 

igo 


hand,  it  is  said  thai  if  trusts  were  not  capitalized  to  so  high  a 
figure  they  could  not  charge  so  high  a  rate;  that  the  charges  arc 
due  to  the  over-capitalization  and  to  the  effort  to  earn  a  sufficient 
dividend  or  interest  upon  that  capitalization.  This  I  hold  to  he  a 
fundamental  error. 

It  is  not  because  a  corporation  is  capitalized  at  a  certain 
figure  that  it  is  enabled  to  make  certain  charges,  but  because,  on 
the  contrary,  it  is  able  to  make  charges,  it  makes  the  capitalization. 
It  is  not  because  a  railroad  is  worth,  or  reputed  to  be  worth,  or 
regarded  to  be  worth,  $100,000,000  that  it  earns  $5,000,000  a  year, 
but,  on  the  contrary,  because  it  earns  $5,000,000  a  year  it  is  cap- 
italized at  $100,000,000.  There  are  those,  on  the  other  hand,  who 
claim  that  capitalization  is  entirely  a  matter  of  indifference ;  so 
that  it  is  a  question  purely  of  bookkeeping ;  and  so  it  is,  but  book- 
keeping questions  have  their  importance.  The  function  of  book- 
keeping, as  I  take  it,  is  to  tell  the  truth  in  regard  to  business,  and 
when  you  say  that  it  makes  no  difference  whether  you  capitalize 
at  one  figure  and  say  your  earnings  are  10  per  cent.,  or  capitalize 
at  double  that  figure  and  say  your  earnings  are  5  per  cent.,  I  say 
the  statement  is  very  much  like  saying  there  is  not  much  harm  in 
lying  provided  every  one  knows  you  are  a  liar  and  you  state  it 
yourself.  The  books  of  a  company  ought  to  state  not  lies,  but 
facts,  and  the  capitalization,  as  a  part,  and  a  necessary  part  in 
every  sense,  is  not  bookkeeping. 

The  lies  which  are  told  by  over  capitalization,  and  sometimes  by 
under-capitalization,  are  always  coupled  with  other  falsifications ; 
for  since  both  sides  of  a  capital  account  must  balance,  if  you  intro- 
duce error  at  one  point  it  must  be  offset  by  error  at  another 
point,  and  if  the  liability  side  is  swollen  or  padded  by  watered  or 
over-capitalization,  it  follows  as  a  necessary  consequence  that 
the  bookkeeper  must  contrive  to  exaggerate  the  value  of  the  as- 
sets on  the  opposite  side.  In  fact,  there  is  little  if  any  reason  for 
over-capitalization  except  just  such  deceit.  Thus  assets  maybe 
exaggerated  by  giving  fancy  prices  to  real  estate ;  by  putting  in 
an  invention  at  an  arbitrary  figure ;  by  taking  bad  debts ;  buying 
up  systematically  bad  debts  and  entering  them  at  their  face  in- 
stead of  their  market  value. 

EXCESSIVE  CAPITALIZATION  PROMOTES  DECEIT. 

These  and  other  methods  enable  a  tricky  bookkeeper 
or  accountant  to  exaggerate  the  asset  side,  and  therefore  ex- 
aggerate   the    liability    side.      The    deceit    that    is    practiced 

191 


by  this  over-capitalization  is  evil  if  it  is  actually  effected,  and  we 
all  know  that,  though  in  Wall  Street  nominal  capitalization  is 
discounted,  the  general  public  is  commonly  deceived.  Those  who 
invest  in  bonds  of  a  company  overestimate  the  security  or  margin 
in  the  assets  of  that  company  on  the  basis  of  which  those  bonds 
are  guaranteed.  Those  who  invest  in  the  stock  of  the  company 
overestimate  the  safety  of  that  company  from  falling  into  the 
hands  of  a  receiver,  and  the  general  public  is  deceived  as  to  the 
real  history  and  nature  of  the  enterprise. 

In  other  words,  it  seems  to  me  that  the  question  of  capitalization 
is  fundamentally  a  question  of  deceit,  and  the  reform  of  capital  is 
a  part  of  the  whole  program  of  publicity,  and  the  most  important 
part,  and  that  the  proper  cure  for  over-capitalization,  as  well  as 
all  the  details  of  bookkeeping,  is  to  be  found  in  laws  of  publicity 
of  accounts,  with  proper  regulation  as  to  how  they  shall  be  con- 
structed. This  we  know  has  been  effective  in  banking  and,  to  a 
large  extent,  in  insurance;  and  in  spite  of  the  abuses  in  both  of 
those  branches,  of  which  we  have  heard  so  much  in  the  last  few 
years,  any  one  familiar  with  their  history  knows  that  a  generation 
ago  the  abuses  were  much  worse  and  now,  as  Professor  Jenks 
has  remarked,  the  Interstate  Commerce  Commission  is  about  to 
establish  systems  of  accounting  for  railroads.  So  one  institution 
after  another  is  brought  under  the  standardization  of  accounts, 
and  I  believe  that  in  the  standardizing  of  accounts  is  to  be  found 
one  of  the  most  effective  remedies  against  trusts. 


\<v 


PUBLICITY  AND  PROPER  ACCOUNTING  REQUIRED. 

If,  then,  accounts  of  trusts  were  made  in  such  a  form  that  any 
business  man  ordinarily  versed  in  business  accounts  could  tell  at 
a  glance  what  they  purported  to  show,  the  public  would  have  the 
publicity  which  they  require.  How  are  the  accounts  to  be  accur- 
ately kept?  How  is  over-capitalization  to  be  avoided?  How  is 
a  balance  sheet  to  be  drawn  up  to  tell  the  truth  ?  I  believe  in  the 
principle  that  Mr.  Seligman  spoke  about:  That  earning  power 
should  be  capitalized.;  and  the  other  principle  to  which  he  re- 
ferred, that  the  paid-up  capital  should  be  the  basis  of  capitaliza- 
tion is,  as  a  matter  of  fact,  merely  a  variant  of  the  general  prin- 
ciple that  earning  power  should  be  capitalized ;  for  when  an  enter- 
prise is  first  launched  it  stands  to  reason  that  the  paid-up  capital 
is  paid  up  merely  because  those  who  pay  it  up  believe  that  it  is  at 
any  rate  not  more  than  the  capitalized  value  of  future  earnings. 

192 


If,  then,  when  a  company  is  started  the  capitalization  is  fixed 
at  a  paid-up  capital,  together  with  the  value  of  any  additional 
franchises  or  stock  that  is  issued  for  other  than  cash  considera- 
tion, we  have  at  that  point  of  time  accurate  books,  and  if  each 
succeeding  year  the  books  are  revised,  it  ought  to  be  possible  to 
tell  at  a  glance  not  only  what  the  state  of  the  capital  is  at  that 
time,  but  also  what  the  history  has  been  in  the  meantime.  If,  to 
take  the  case  which  Mr.  Seligman  mentioned,  there  has  been  a 
real  depreciation  in  value,  this  should  be  accounted  for  in  the 
following  year,  either  by  cutting  down  the  capitalization  or  by  re- 
quiring the  stockholders  to  make  good  by  adding  paid  up  capital 
sufficient  to  make  up  the  deficit.  As  to  what  element  should  be 
capitalized,  Professor  Jenks  asked  the  question  whether  monopo- 
listic privileges  should  be  capitalized.  It  seems  to  me  that 
question  is  bound  up  with  another;  whether  monopolistic  power 
should  be  exercised ;  if  it  is  exercised,  if  it  is  permitted  that  it 
is  to  be  exercised,  it  ought  to  be  capitalized  so  that  the  books  will 
tell  the  public  that  it  is  exercised.  I  know  a  telephone  company 
which,  in  order  to  make  its  accounts  more  correct,  actually  put  on 
the  asset  side  the  value  of  their  franchise ;  not  that  they  had  paid 
anything  for  the  franchise,  but  that  it  had  a  monopoly  value 
entered  on  their  books,  frankly,  at  $25,000.  The  question 
whether  that  power  ought  to  be  exercised,  or  whether  the  public, 
who  had  given  $25,000  worth  of  privilege  for  nothing,  should  be 
entitled  to  receive  it  back  in  lower  rates  for  telephone  service,  is 
the  question  rather  than  the  question  whether  the  $25,000,  if  ef- 
fective, should  be  entered. 

If  a  correct  system  of  bookkeeping,  standardized  for  each  kind 
of  enterprise,  could  be  put  into  operation,  that  would,  of  course, 
not  solve  the  trust  problem — it  would,  of  course,  do  nothing 
more  than  regulate  the  manner  in  which  the  trusts  should  tell 
their  story  before  the  public;  but  if  it  was  effective  in  causing 
them  to  give  a  correct  instead  of  an  incorrect  account  of  their 
transactions  it  would  form  the  basis  upon  which  any  true  solu- 
tion of  the  trust  problem  must  be  founded. 

THE  CHAIRMAN :  I  shall  now  vary  the  order  of  proceed- 
ings slightly,  because  Professor  Parsons  has  an  engagement.  I 
will,  therefore,  now  take  the  opportunity  of  introducing  Pro- 
fessor Parsons,  who  will  speak  on  "Trust  Philosophy  Boiled 
Down." 

193 


Prof.  Frank  Parsons. 

Mr.  Chairman — Trusts  and  combines  result  from  the  action  of 
the  beneficent  principles  of  union  and  co-operation.  Industrial 
organization  is  almost  as  important  as  civic  organization.  Men 
united  into  tribes,  States  and  nations  because  they  found  that  a 
political  combination  gave  them  strength  for  defense,  aggression 
and  civic  action  in  general,  and  they  are  learning  to  unite  in  great 
industrial  organizations  because  they  find  that  combination  in 
industry  means  economy  and  increase  of  power. 

Industrial  combination  is  in  itself  an  economic  and  social  bene- 
fit. There  are  many  cases  on  record  in  which  combination  in  man- 
ufactures has  resulted  in  saving  one-half  to  three-quarters,  or 
even  four-fifths  of  the  labor  and  capital  required  to  yield  an 
equal  product  under  the  former  competitive  conditions. 

Competition  means  economic  waste,  bad  character  product, 
and  civic  and  social  damage.  The  temporary  relief  to  the  public 
in  the  matter  of  prices  is  secured  at  unreasonable  cost.  For 
many  years  economists  have  recognized  these  truths  in  relation 
to  water  supply,  gas  and  electric  light  and  street  railway  systems, 
and  have  declared  that  such  services  should  be  recognized  as 
monopolies  and  regulated  as  such.  And  now  this  old  principle, 
long  ago  applied  in  Great  Britain  and  other  countries  to  these 
''natural  monopolies,"  is  coming  to  be  recognized  as  equally  ap- 
plicable to  monopolies  by  combination. 

IMPRACTICABLE  TO  DESTROY  TRUSTS. 

The  destruction  of  trusts  and  combines  is  a  false  aim.  In  the 
first  place,  it  is  impracticable.  Trusts  and  combines  exist  in 
obedience  to  the  law  of  industrial  gravitation  which  outranks  any 
law  that  Congress  or  Legislature  can  enact.  It  is  impossible  by 
any  legislation  practicable  in  a  free  country  to  prevent  men  from 
acting  in  harmony  if  they  have  the  sense  and  character  to  do  so. 
We  may  prevent  corporations  from  holding  stock  in  other  cor- 
porations, but  we  cannot  prevent  individuals  from  buying  stocks 
or  uniting  properties  by  purchase  or  exchange  of  interests  therein. 
Combination  is  so  profitable  that  it  continues  to  exist  and  multiply 
even  in  the  forms  prohibited  by  law.  The  Standard  Oil  Trust, 
realizing  $490,000,000  of  profits  in  half  a  dozen  years,  can  well 
afford  to  defy  the  law.  All  the  penalities  likely  to  be  imposed 
are  as  nothing  compared  with  the  profits.  Even  the  $29,000,000 
fine,  great  as  it  is,  will  doubtless  be  far  more  than  covered  by  the 
rebates  and  railroad  favors  received  during  the  time  the  ques- 

194 


tion  of  this  violation  of  law  and  payment  of  penalty  is  under 
litigation,  even  if  the  trust  does  not  succeed  in  finding  some  weak 
link  in  the  judicial  chain  through  which  it  can  escape  entirely 
from  the  payment  of  the  penalty. 

UNDESIRABLE  TO  DESTROY  TRUSTS. 

In  the  second  place,  the  destruction  of  trusts  and  combines  is 
undesirable,  combination  being  in  itself  a  social  and  industrial 
good.  It  is  not  combination,  but  the  abuse  of  the  power  of  com- 
bination that  ought  to  be  abolished.  The  real  problem  is  to 
adopt  measures  that  will  secure  the  fair  distribution  of  the  ben- 
efits of  combination  and  prevent  the  absorption  of  an  undue 
share  of  those  benefits  by  a  few  individuals,  or  any  arbitrary  or 
unjust  use  of  the  powers  of  combination  for  the  private  pur- 
poses of  the  controlling  owners. 

When  John  D.,  in  his  Standard  Oily  statements,  intimates  that 
laws  against  trusts  and  combines  are  foolish  and  unjust,  he  is 
talking  economic  sense.  Since  industrial  combination  is  one  of 
the  principal  sources  of  economy,  power  and  efficient  service,  to 
prohibit  combination  is  to  prohibit  the  economy  and  efficiency 
that  come  through  combination.  To  prosecute  and  fine  com- 
bination is  to  prosecute  and  fine  economy  and  efficiency.  Our 
anti-combine  legislation  makes  economy  a  crime;  progress  a 
misdemeanor,  and  efficiency  a  felony. 

This  is  all  wrong,  and  so  far,  John  D.  is  all  right. 

But  when  John  D.  proceeds  to  intimate  that  the  men  in  posses- 
sion of  trusts  and  combines  should  be  left  to  manage  them  accord- 
ing to  their  own  sweet  wills,  no  matter  if  they  make  excessive 
charges,  use  unfair  methods  to  crush  out  would-be  rivals,  selling 
low  at  competitive  points  while  selling  high  at  non-competitive 
points,  resorting  to  rebates  or  railroad  favoritism  of  other  types, 
and  using  the  power  of  combination  to  evade  or  defy  the  law, 
corrupt  governments  and  courts,  oppress  labor  and  fleece  the  pub- 
lic, taking  to  themselves  all  the  benefits  of  the  economies  achieved 
by  combination  and  adding,  perhaps,  new  plunder  by  lifting 
prices  above  the  normal  level  of  the  competitive  regime  that  was 
formerly  in  vogue — when  John  D.  intimates  that  combine  man- 
agers should  be  left  to  operate  the  business  as  they  please,  he  is 
talking  economic,  political  and  social  nonsense. 

The  law  should  clearly  separate  the  use  from  the  abuse  and 
should  encourage  the  former  and  suppress  the  latter. 

195 


METHODS  OF  DEALING  WITH  TRUSTS. 

Several  methods  of  dealing  with  trusts  and  combines  have  been 
proposed : 

(i.)  We  may  let  them  alone.  That  is  John  D.'s  plan,  but  it  is 
not  likely  to  suit  the  people  of  the  United  States. 

(2.)  We  may  prohibit  them.  The  original  savage  impulse  is 
to  destroy  whatever  seems  to  injure  us.  This  primitive  instinct 
crops  out  frequently  in  civilized  man  and  in  the  most  advanced 
communities.  Even  President  Roosevelt,  who  may  be  supposed 
to  be  somewhat  civilized,  has  to  go  off  every  now  and  then  to 
shoot  a  bear  to  let  the  impulse  to  destruction  explode  under  cir- 
cumstances likely  to  reduce  the  damage  to  a  minimum.  Com- 
munities manifest  the  same  reversion  to  the  savage  type  of  con- 
duct, and  the  blind  laws  against  trusts  and  combines,  trying  to 
destroy  what  is  good  as  well  as  what  is  bad,  constitute  an  excel- 
lent illustration  of  the  action  of  this  primitive  instinct  in  civilized 
society.    This  method  cannot  succeed  and  should  not  succeed. 

(3.)  We  may  try  to  remove  the  causes  of  the  growth  and 
power  of  trusts  and  combines.  The  plan  of  removing  the  protec- 
tion of  the  tariff  from  industries  in  which  large  monopolies  have 
developed  is  of  this  class,  as  are  also  laws  against  rebates  and 
railroad  favoritism ;  laws  forbidding  a  corporation  to  hold  stock 
in  other  corporations,  and  laws  requiring  that  goods  be  sold  at 
the  same  price  to  all  comers  at  the  factory  door. 

(4.)  We  may  rely  upon  investigation  and  publicity.  Publicity, 
no  doubt,  does  have  a  powerful  restraining  effect  on  the  conduct 
of  business  affairs  wherever  the  managers  have  not  lost  all  con- 
science and  sensitiveness  to  the  approbation  of  their  fellow  men. 
But  in  the  very  worst  cases  where  relief  is  most  imperative,  pub- 
licity has  proved  of  little  or  no  avail.  The  public  has  known  for 
many  years  the  frauds  and  iniquities  of  Standard  Oil  and  the 
Beef  combine,  and  yet  those  evils  have  continued  in  one  form 
or  another  with  practically  unabated  virulence. 

(5.)  We  may  provide  for  Federal  license  and  incorporation 
with  thorough  and  continuous  supervision  by  Federal  authori- 
ties. This  is  an  excellent  plan  from  which  much  good  may  be 
expected.  But  we  cannot  hope  in  this  way  to  prevent  excessive 
charges  or  the  secret  use  of  combine  power  for  anti-public 
purposes. 

(6.)  We  may  enact  that  prices  and  wages  shall  be  subject  to 
final  adjudication  by  boards  of  arbitration  representing  all  three 
parties  in  interest,  namely,  labor,  capital  and  the  public.   It  is  not 

196 


fair  for  either  party  to  a  sale  or  contract  to  fix  the  terms.  In 
a  monopolized  industry  it  is  unfair  to  permit  the  seller  to  fix  the 
price,  and  it  would  be  equally  unfair  for  the  public,  which  is  the 
buyer  in  this  case,  to  fix  the  price.  The  only  recourse  in  harmony 
with  economic  and  ethical  principles  is  the  fixing  of  prices  and 
wages  by  decision  of  impartial  tribunals. 

(7.)  We  may  adopt  a  system  of  graded  taxes;  putting  a  high 
rate  of  taxation  on  aggressive,  anti-public  combines  which  refuse 
to  open  their  books  to  public  inspection,  or  make  fair  prices,  or 
reasonable  capitalization,  etc. ;  and  a  low  rate  of  taxation  on  pub- 
lic spirited  combines  which  open  their  books  to  public  inspection 
and  make  fair  capitalization,  just  prices,  etc. 

The  reason  that  men  combine  to-day  in  anti-social  forms  is 
that  profit  lies  in  that  direction.  If  profit  can  be  severed  from 
anti-social  methods  and  attached  to  forms  of  organization  and 
management  that  are  in  harmony  with  the  public  good  while  loss 
is  attached  to  anti-social  conduct,  men  will  adopt  the  superior 
types  of  organization  and  business  methods,  and  trusts  and  com- 
bines will  become  co-operative  and  public  spirited  instead  of  ag- 
gressive and  anti-public. 

(8.)  We  may  provide  that  Labor  and  the  Public  shall  be  rec- 
ognized as  partners  in  monopolistic  industry  and  entitled  to 
elect  representatives  to  act  on  the  board  of  directors. 

(9.)  We  may  resort  to  temporary  public  operation  of  the  bus- 
iness of  trusts  and  combines  which  violate  the  law.  If  a  corpora- 
tion cannot  pay  its  debts  a  receiver  may  be  appointed  by  the  court 
to  manage  the  business  of  the  company  until  it  is  once  more  on  a 
sound  basis.  So,  if  a  trust  or  combine  is  convicted  of  breaking 
the  law  a  public  officer  might  be  appointed  by  the  court  who 
should  manage  the  business  under  supervision  of  the  court,  using 
the  profits  to  pay  off  and  extinguish  the  watered  stock  or  excess 
capital,  reduce  charges  to  a  fair  level,  see  that  labor  had  reason- 
able wages  and  just  conditions,  and  bring  the  whole  business 
into  harmony  with  law  and  the  public  good.  Then  the  property 
could  be  returned  to  the  company  to  be  managed  under  careful 
and  persistent  supervision  with  another  resort  to  temporary  pub- 
lic management  in  case  of  any  further  serious  breach  of  law. 

(10.)  We  can  establish  permanent  public  operation  of  monopo- 
listic industries,  acquiring  title  by  the  issue  of  public  bonds  ur 
through  purchase  with  funds  raised  by  progressive  income  and 
inheritance  taxes,  or  in  any  one  of  several  other  ways  that  have 
been  frequently  urged  upon  the  public.    In  the  case  of  railroads, 

197 


street  railways,  lighting  systems  and  other  natural  monopolies 
where  the  problem  cannot  be  adequately  met  by  the  development 
of  voluntary  co-operation,  public  ownership  is  the  ultimate  solu- 
tion, care  being  taken  in  all  cases  that  political  conditions  shall 
be  made  such  as  to  afford  a  reasonable  prospect  of  successful 
public  operation  of  these  important  properties.  In  commerce, 
manufactures  and  agriculture,  on  the  other  hand,  where  the  field 
is  open,  for  the  most  part,  to  the  growth  of  voluntary  co-opera- 
tion, legislative  co-operation  should  not  be  resorted  to  until  every 
reasonable  effort  has  been  made  to  solve  the  problem  by  methods 
of  voluntary  action  under  the  direction  and  encouragement  of 
wise  laws.  v  For  my  own  part,  I  believe  that  in  commerce,  manu- 
factures and  agriculture,  voluntarv  co-operation  will  ultimately 
solve  the  problem  of  monopoly,  while  public  ownership  will  prove 
to  be  the  ultimate  remedy  in  the  case  of  railroads  and  other  in- 
dustries involving  a  large  element  of  either  natural  or  legislative 
(franchise)  monopoly. 

THE  CHAIRMAN:  I  have  now  to  introduce  Mr.  John  S. 
Crosby,  the  last  speaker,  whose  topic  is  "Corporations  as  Such." 

Mr.  John  S.  Crosby. 

Mr.  Chairman — I  will  get  through  as  quickly  as  I  can.  It  is 
now  some  fifteen  years  since  I  first  gave  thought  to  this  question, 
and  the  opinions  I  formed  then  have  been  strengthened  every 
fifteen  minutes  since  that  time.  While  this  is  academic  and  ab- 
stract, as  they  say,  you  must  remember  that  justice  is  abstract. 

It  is  much  the  fashion  when  treating  of  combinations  known 
as  trusts  to  begin  by  disclaiming  and  deprecating  any  sentiment 
of  opposition  to  "corporations  as  such,"  and  yet,  but  for  that 
same  intangible  though  touchy  personality,  the  corporation  per 
se,  there  would  be  no  such  combinations. 

Adverse  criticism  of  corporations  is  often  likened  to  the  some- 
time hostility  of  laborers  to  labor-saving  machinery.  The  com- 
parison would  be  faulty  if  only  for  the  reason  that  corporations 
have  a  decidedly  different  effect  upon  industrial  and  social  con- 
ditions from  that  produced  by  machinery.  It  is,  moreover,  par- 
ticularly inapt  in  view  of  the  fact  that  while  the  machine  is  the 
legitimate  child  of  labor  the  corporation  is  the  illegitimate  off- 
spring of  civil  power. 

Industrial  combinations  that  can  be  formed  and  maintained 
without  special  favor  of  the  State  do  indeed  stand  upon  the 
same  economic  footing  as  labor-saving  machines.  The  restric- 
ts 


tions  which  governments  in  their  wisdom  have  imposed  upon 
unprivileged  partnerships  and  joint-stock  associations  are  as 
irrational  as  the  antagonism  of  ignorant  laborers  to  the  intro- 
duction of  machinery. 

CO-OPERATION   AND    CORPORATION    DISTINGUISHED. 

Co-operation  voluntary  and  unprivileged  is  simply  an  exercise 
of  the  natural  right  of  contract.  It  requires  neither  aid  nor 
permission  of  the  State,  and  is  not  properly  any  more  subject 
to  governmental  interference  or  supervision  than  the 
simplest  form  of  individual  enterprise.  Any  man  has  a  right 
to  enter  into  agreement  with  any  number  of  other  men  where- 
by they  undertake  for  a  stipulated  wage  to  assist  him  in  the 
prosecution,  for  his  benefit,  of  any  legitimate  business.  He 
and  they  have  no  less  right  to  make  a  different  agreement 
whereby  they  undertake  to  carry  on  the  same  business  for  their 
common  benefit.  The  State  has  properly  no  more  concern  with 
the  latter  contract  than  with  the  former,  its  legitimate  function 
in  regard  to  either  being  merely  to  provide  for  peaceful  and 
equitable  adjustment  of  any  personal  differences  arising  there- 
from, which  it  does,  not  especially  or  primarily  for  the  sake  of 
the  parties  to  the  difference,  but  for  the  maintenance  of  a  just 
peace  and  public  order,  necessity  for  which  constitutes  the 
primary  and  only  just  warrant  for  the  exercise  of  civil  power. 

Natural  combinations,  those  formed  and  maintained  without 
special  favor  of  the  State,  are  subject  to  the  wise  limitations  of 
natural  law,  in  regard  both  to  the  number  of  individuals  who 
will  combine  in  one  and  the  same  association,  and  to  the  length 
of  time  they  will  continue  to  act  together,  and,  consequently, 
also  in  regard  to  the  amount  of  capital  they  can  command. 
There  is  nothing  in  reason  or  experience  to  warrant  apprehen- 
sion that  any  body  of  men  will  by  reason  of  such  combination 
ever  become  so  great  or  powerful  as  to  monopolize  any  con- 
siderable branch  of  industry.  Any  approach  that  a  natural  as- 
sociation of  individuals  may  take  toward  such  monopoly  will  be 
due  to  some  sort  of  privilege  enjoyed  by  it  rather  than  to  its 
collective  character.  Natural  competition,  that  of  unprivileged 
natural  persons,  is  not  self-destructive.  It  has  never  been  de- 
stroyed or  even  restricted  except  by  government. 

The  tendency  at  the  present  time  is  said  to  be  toward  larger 
combinations,  which  is  doubtless  the  tendency  at  all  times  for 

199 


the  reason  that  the  more  intelligent  and  trustworthy  men  be- 
come the  more  readily  do  they  unite  and  co-operate  with  one 
another  for  the  accomplishment  of  common  purposes.  This 
natural  and  therefore  beneficent  tendency  should  not,  however, 
be  confounded  with  the  present  abnormal  drift  toward  utter 
displacement  of  natural  associations  by  artificial  combinations 
made  possible  by  the  grant  of  corporate  privilege. 

SPECIAL  PRIVILEGES  OF  THE  CORPORATION. 

The  corporation  is  a  political  device  whereby  natural  persons 
who  are  to  co-operate  for  one  purpose  or  another,  are  by  the 
favor  of  the  State  more  or  less  relieved  from  the  limitations 
incident  to  natural  association,  and  the  collective  body  into 
which  they  are  formed  becomes  an  artificial  person  clothed  with 
certain  attributes  and  powers  not  enjoyed  by  natural  persons 
or  associations,  being  unnatural  and  peculiar  to  the  State  from 
which  they  are  derived. 

The  device  of  incorporation  by  the  State  seems  to  have  been 
originally  and  for  a  long  time  resorted  to  only  for  the  purpose 
of  clothing  individuals  with  the  civil  authority  and  power  neces- 
sary to  the  performance  by  them  of  some  supposedly  public 
service  with  which  they  were  entrusted  for  the  reason  that  it 
did  not  seem  to  have  been  adequately  provided  for  in  the 
ordinary  machinery  of  government.  As  late  as  Blackstone's 
time  it  was  only  "for  the  advantage  of  the  public"  that  corporate 
entity  was  presumed  to  be  created.  The  courts  of  our  own 
country  have  often  held  that  the  purpose  of  incorporation 
should  always  be,  "The  accomplishment  of  some  public  good." 
It  is  only  within  the  last  forty-odd  years  that  corporate  privi- 
lege has  come  to  be  so  granted  that  its  recipients  are  well  war- 
ranted in  saying,  "The  public  be  damned."  How  is  this  new 
departure  to  be  accounted  for,  this  abandonment  of  precedent 
and  principle,  this  change  from  the  policy  of  granting  privileges 
to  none,  to  that  of  handing  them  out  to  anybody  for  the  asking? 

It  may  perhaps  be  contended  that,  since  charters  or  articles 
of  incorporation  are  now  ostensibly  free  to  all,  they  are  no 
longer  privileges.  It  is  evident,  however,  that  the  incorporated 
company  has  some  advantage  over  the  mere  partnership,  for 
otherwise  the  former  would  not  have  become,  as  it  has,  the 
rule  and  the  latter  the  increasingly  rare  exception  in  almost 
every  line  of  business.  It  is  no  less  evident  that  the  combina- 
tions called  trusts,  whatever  their  virtues  or  vices,  could  not 

200 


be  maintained  without  the  cohesive  force  of  corporate  privilege. 
It  is  generally  conceded  that  whatever  special  facility  they  have 
for  wrongdoing  is  due  in  some  degree  at  least  to  the  possession 
of  corporate  power,  and  one  of  the  questions  deemed  pertinent 
to  the  deliberations  of  this  Conference  in  relation  to  the  "trust 
problem,"  is,  "How  should  the  corporation  be  constructed?" 

It  is  clear  that,  if  the  corporation  is  of  no  advantage  to  any 
one,  it  does  not  matter  how  it  is  constructed,  and  equally  clear 
that  it  cannot  bring  substantial  advantage  to  anybody  without 
putting  somebody  else  to  corresponding  disadvantage,  so  that 
the  real  question,  if  justice  be  sought,  would  seem  to  be,  How 
shall  the  corporation  be  constructed  so  as  not  to  be  of  any 
advantage  to  anybody? 

TRUST  QUESTION  ONE  OF  POLITICS  MORE  THAN  ECONOMICS. 

The  corporation  has  been  called  a  natural  evolution  of  the 
partnership,  and  the  trust  but  a  phase  or  stage  in  the  natural 
development  of  business  methods,  as  if  there  could  be  anything 
natural  in  the  handiwork  of  a  State  legislature.  Corporate 
power  is  generated  and  granted  and  can  be  regulated,  if  at  all, 
only  by  government,  and  the  whole  trust  or  corporation  prob- 
lem is  not  so  much  economic  as  it  is  political,  requiring  for 
its  solution  careful  examination  as  to  the  authority  of  the  State 
to  grant  such  power.  The  word  "ought"  is  said  to  have  no 
place  in  political  economy,  but  it  does  not  follow  that  because 
a  question  of  government  involves  economic  considerations  it 
is  any  the  less  ethical.  Government  itself  is  never  more  or  less 
than  human  conduct,  the  conduct  of  man  toward  man. 

The  corporations  which  we  are  here  called  upon  to  consider 
include  such  as  are  quasi-public,  having  for  their  double  purpose 
the  performance  of  some  public  service  and  the  emolument  of 
the  private  persons  entrusted  therewith,  and  also  those  which 
are  formed  wholly  for  purposes  of  private  gain,  and  may  for 
distinction  be  called  private  corporations. 

QUASI-PUBLIC  CORPORATIONS. 

The  theory  upon  which  quasi-public,  or  so-called  public  ser- 
vice corporations  are  created  and  defended  is  well  stated,  in  an 
opinion  rendered  some  forty  years  ago  by  the  Supreme  Court 
of  the  United  States,  as  follows  : 

"The  purposes  to  be  attained  are  generally  beyond  the  ability 

201 


of  individual  enterprise,  and  can  only  be  accomplished  through 
the  aid  of  associated  wealth.  This  will  not  be  risked  unless 
privileges  are  given  and  securities  furnished  in  an  act  of  in- 
corporation. The  wants  of  the  public  are  often  so  imperative 
that  a  duty  is  imposed  on  government  to  provide  for  them; 
and  as  experience  has  proved  that  a  State  should  not  attempt 
directly  to  do  this,  it  is  necessary  to  confer  on  others  the 
faculty  of  doing  what  the  sovereign  power  is  unwilling  to  under- 
take. The  legislature  therefore  says  to  public-spirited  citizens, 
'If  you  will  embark  with  your  time,  money  and  skill,  in  an 
enterprise  which  will  accommodate  the  public  necessities,  we 
will  grant  to  you  for  a  limited  period,  or  in  perpetuity,  privileges 
that  will  justify  the  expenditure  of  your  money,  and  the  employ- 
ment of  your  time  and  skill/  Such  a  grant  is  a  contract  with 
mutual  considerations,  and  justice  and  good  policy  alike  require 
that  the  protection  of  the  law  should  be  assured  to  it."  (1) 

The  Court  might  have  added  that  it  is  generally  those  same 
public-spirited  citizens,  seeking  opportunities  for  exceptionally 
profitable  investment  of  associated  wealth,  who  first  discover 
and  make  known  the  existence  of  public  wants  so  imperative 
as  to  make  it  the  duty  of  government  to  provide  for  them,  and 
who  also  persuade  the  legislature  that  the  State  should  not 
attempt  directly  to  make  such  provision. 

When  and  where,  it  may  be  asked  with  all  due  respect  to  the 
Court,  has  experience  ever  proved  that  the  State  should  not 
attempt  directly  to  do  its  duty?  There  is  no  other  way  of  doing 
it.  and  none  is  ever  suggested  unless  it  involves  the  probability 
of  private  gain  to  somebodv.  There  are  duties  and  functions 
of  the  State  which  it  performs  directly,  and  as  we  know,  indif- 
ferently enough,  yet  we  hear  no  suggestion  of  farming  them 
out  to  private  persons,  natural  or  artificial,  for  the  reason  that 
their  performance  can  hardly  be  rendered  profitable. 

SHOULD    PUBLIC    FUNCTIONS    BE     ENTRUSTED    TO     PRIVATE 

PERSONS? 

If  there  were  no  public-spirited  citizens  able  and  willing  to 
perform  these  remunerative  duties  for  the  State,  the  latter  would 
evidently  be  obliged  to  perform  them  itself,  and  directly,  or 
neglect  its  duty.  It  may  be  that  if  the  State  did  its  duty  in 
all  respects,  there  might  not  be  so  many  citizens  who,  although 


(i)   Binghamton  Bridge,  3  Wall,  51. 

202 


but  a  part  of  the  State,  seem  to  be  wealthier  than  all  the  State. 
Individuals  entrusted  with  the  performance  of  public  functions 
are  given  a  two-fold  advantage  over  their  fellow  citizens.  They 
not  only  enjoy  the  prestige  and  power  that  come  with  the  privi- 
lege of  incorporation,  but  are  enabled  profitably  to  engage  in 
undertakings  which  nature  has  placed  beyond  the  ability  of 
natural  persons.  To  open  up  these  artificial  opportunities  for 
the  investment  of  private  capital  gives  to  those  who  embrace 
them  an  unnatural  and  unfair  advantage  over  their  competitors 
in  the  struggle  for  wealth.  Such  injustice  outweighs  any  con- 
siderations of  mere  expediency. 

But  the  expediency  even  of  entrusting  the  performance  of 
public  functions  to  private  persons  has  yet  to  be  shown.  Who 
shall  say  that,  if  no  longer  ago  than  when  that  opinion  was 
rendered,  government  had  itself  undertaken  directly  to  dis- 
charge its  duty  in  this  respect,  and  had  meanwhile  received  the 
hearty  encouragement  of  all  wealthy  citizens  in  such  endeavor — 
who  shall  say  that  any  imperative  public  wants  would  not  have 
been  provided  for  at  least  as  satisfactorily  as  they  now  are? 
Who  shall  say  that  direct  performance  of  all  such  public  func- 
tions by  government  through  appropriate  departments,  whether 
municipal,  State  or  Federal,  would  have  resulted  in  worse  con- 
ditions than  those  which  obtain  to-day,  and  are  in  some  measure 
the  occasion  of  this  Conference? 

The  State  has  never  really  tried  to  do  its  duty  in  the  premises. 
We  are  told  that  direct  performance  by  government  is  not  so 
economical  as  that  by  corporations.  Who  gains  by  the  economy? 
The  State  does  many  things  that  not  only  bring  no  pecuniary 
return  at  all,  but  involve  expense.  It  can  certainly  afford  to 
do  other  necessary  things  for  whatever  it  costs  to  do  them 
right.  We  are  also  told  that  the  State  could  not  afford  to 
pay  for  the  services  of  competent  superintendents  of  the  public 
service.  Is  it  not  possible  that  if  corporate  monopoly  were 
destroyed  there  might  be  some  decline  in  the  market  value  of 
certain  high-class  services,  not  to  mention  so-called  securities? 
We  hear  much  at  present  about  swollen  fortunes,  but  little  as 
to  the  cause  of  the  swelling  except  that  it  is  generally  regarded 
as  being  somewhat  dropsical.  If  we  have  a  right  to  maintain 
government  there  must  be  some  right  way  of  performing  its 
every  function,  a  way  that  leads  to  no  injustice,  no  inequitable 
disturbance  of  those  natural  economic  conditions  and  human 
relations  which  constitute   the   rights  of  man.     The  anarchist 

203 


has  no  stronger  argument  against  government  than  that  af- 
forded in  its  own  stupid  admission  that  it  has  duties  which  can- 
not be  so  well  performed  by  itself  as  by  private  persons;  and 
yet  we  know  that  the  latter  could  do  nothing  toward  such  per- 
formance but  for  that  outstretched  arm  of  the  State,  the  corpora- 
tion. There  are  reasons  enough  why  the  so-called  public-ser- 
vice corporation  should  never  have  been  brought  into  existence. 
The  State  should  have  shirked  no  responsibility.  It  should  be 
as  just  as  it  requires  the  citizen  to  be.  It  should  enter  into  no 
partnership  with  private  persons.  The  manager  of  a  quasi- 
public  corporation  finds  it  indeed  hard  to  serve  his  two  sets  of 
masters,  the  public  and  the  stockholders.  That  is  one  reason 
why  his  services  are  so  high-priced.  It  is  but  natural  that  he 
should  lean  to  the  side  that  fixes  and  nominally  pays  his  salary. 
The  so-called  public  ownership  movement,  so  far  as  it  con- 
templates exclusively  governmental  performance  of  really  public 
functions,  is  a  movement  in  the  direction  of  just  government, 
and  will  gradually  do  away  with  any  excuse  for  existence  of 
the  quasi-public,  or  public  service  corporation. 

PRIVATE  CORPORATIONS  DO  NOT  FULFILL  PUBLIC  FUNCTIONS. 

It  is  by  no  means  true,  however,  that,  simply  because  the 
business  transacted  by  a  corporation  has  grown  to  never  so 
gigantic  proportions,  its  conduct  is  therefore  a  public  function. 
The  establishment  and  operation  of  the  most  insignificant  street 
railway  or  public-lighting  plant  is  essentially  a  public  function 
because  it  cannot  be  performed  without  permission  and  aid 
granted  by  the  public  through  its  agent,  the  State.  On  the 
other  hand,  the  manufacture  and  sale,  for  instance,  of  petroleum, 
steel,  leather,  tobacco,  whiskey,  and  other  such  necessities,  can 
be  conducted  without  such  aid  or  permission,  and  might  be 
carried  on  even  in  the  utter  absence  of  civil  government.  They 
are  no  more  public  functions  than  any  of  the  most  inconsiderable 
branches  of  private  industry.  Enterprises  essentially  private  have 
come  to  assume  their  present  adventitious  public  character 
solely  because  their  promoters  have  been  through  the  grant  of 
corporate  privilege  clothed  with  attributes  and  powers  belong- 
ing to  the  public.  It  is  not  the  business  itself  but  the  corpora- 
tion that  is  public,  notwithstanding  it  is  called  a  private  corpora- 
tion. If  incorporation  were  indeed  necessary  to  transaction  of 
the  business  the  latter  would  therefore  necessarily  be  public. 
It  has  yet  to  be  shown,  however,  that  incorporation  by  the  State 

204 


is  ever  necessary  or  even  conductive  to  the  proper  or  normal 
conduct  of  any  private  undertaking,  and  also  yet  to  be  shown 
by  what  just  warrant  or  authority  government  presumes  to 
create  the  private  corporation. 

THE  CORPORATION  THE  PRODUCT  OF  PRIVILEGE. 

As  already  suggested,  it  may  be  claimed  that  the  advantages 
of  incorporation  are  now  free  to  all,  and  therefore  no  longer 
privileges.  They  are  indeed,  like  straps  in  the  street  cars,  os- 
tensibly free  to  all,  but  nevertheless  above  the  reach  of  many. 
They  are  privileges  which  cannot  in  the  nature  of  things  be 
taken  advantage  of  by  all.  They  can  be  of  use  only  to  those 
who  already  enjoy  some  natural  advantage  over  their  less  suc- 
cessfull  fellowmen,  for  instance,  by  those  having  capital  to 
invest.  They  are  beyond  the  reach  of  those  who  have  only  their 
labor  to  depend  upon,  and  tend  to  widen  the  normal  economic 
distance  between  the  laborer  and  the  capitalist.  It  was  in  the 
grant  of  corporate  privilege  that  Lincoln  saw  being  made  what 
he  termed  "the  effort  to  place  capital  on  an  equal  footing  with 
if  not  above  labor  in  the  structure  of  government."  Nor,  is  it 
the  laborer  alone  who  is  put  to  a  relative  disadvantage.  Many 
possessors  of  capital  are  not  able  or  do  not  care  to  avail  them- 
selves of  the  privileges  of  incorporation.  They  would  gladly  do 
business  as  natural  persons,  an  opportunity  of  which  the  State 
has  no  right  to  deprive  them  as  it  does  by  compelling  them  to 
compete,  if  at  all  with  abnormally  powerful  artificial  persons  of 
its  own  creation.  The  most  that  can  now  be  done  by  the  great 
majority  with  whatever  capital  they  may  have,  is  to  invest  it  in 
the  stock  of  corporations  controlled  by  others.  They  cannot 
themselves  employ  their  capital,  but  must  risk  it  in  speculating 
on  the  ability  and  honesty  of  strangers. 

Nature  produces  inequality  enough  in  the  common  struggle 
for  existence,  and  it  would  seem  that  if  there  is  to  be  any  inter- 
ference by  governmjent,  it  should  be  in  behalf  of  the  weaker 
rather  than  the  stronger.  On  the  contrary,  however,  it  is  the 
latter  who  are  authorized  and  enabled  to  pose  as  that  artificial 
person  which,  inoculated  with  the  virus  of  privilege,  enters  the 
competitive  field  immune  from  ordinary  vicissitudes,  relieved 
from  the  infirmities  of  disease,  death  and  conscience,  and  sooner 
or  later  out-distances  its  unprivileged  competitors  by  lengths 
that  could  never  be  attained  by  natural  persons  one  over  an- 
other. 

205 


It  is  not  here  necessary  to  enter  into  any  analysis  of  the 
power  of  corporations  or  to  dwell  upon  the  universal  tendency 
to  the  abuse  of  power  whatever  its  source.  In  a  decision  by  the 
Supreme  Court  of  Tennessee  rendered  in  1884  in  favor  of  the 
defendant  in  a  suit  brought  by  a  merchant  against  a  railroad 
company  which  had  ruined  his  business  by  forbidding  its  em- 
ployes to  trade  with  him,  the  Court  said: 

"Great  corporations  may  do  great  mischief  and  wrong;  may 
make  and  break  merchants  at  will ;  may  crush  out  competition, 
limit  employment  and  foster  monopolies,  and  thus  greatly  injure 
individuals  and  the  public,  but  power  is  inherent  in  size  and 
strength,  numbers  and  wealth,  and  the  law  cannot  set  bounds 
to  it  unless  it  is  exercised  unlawfully." 

If  that  be,  as  it  seems,  a  correct  statement  of  general  fact,  and 
a  sound  conclusion  of  law,  by  what  just  warrant  does  the  State 
assume  to  increase  "the  size  and  strength,  numbers  and  wealth" 
of  any  body  of  men,  as  it  does  by  incorporation? 

THE  DAWN  OF  COMBINATIONS. 

Some  of  us  are  old  enough  to  have  witnessed  the  genesis  of 
the  trust.  It  began  with  the  comparatively  small  corporation 
which  gradually  forced  the  individual  and  the  partnership  out 
of  business,  thereby  destroying  whatever  of  natural  competition 
obtained  even  in  spite  of  land  monopoly.  Then  followed  the 
only  competition  that  was  possible  among  artificial  persons,  an 
artificial  or  so-called  cut-throat  competition.  To  avoid  that, 
resort  was  had  to  the  combinations  known  as  trusts,  the  pur- 
pose being  to  do  away  with  all  competition.  There  was  some 
excuse  for  formation  of  the  trust,  for  it  seemed  necessary  in 
order  to  destroy  a  competition  that  was  unnatural  and  itself  de- 
structive. There  was,  however,  no  semblance  of  excuse  for 
formation  of  the  corporation.  It  destroyed  a  competition  that 
1  was  natural  and  necessary  to  industrial  liberty.  The  outcry  of 
j  the  corporation  against  the  trust  is  heard  be  :ause  it  has  a  vocal 
strength  given  to  it  by  the  State.  The  wail  of  the  individual, 
the  natural  person,  as  he  fell  perhaps  before  that  same  corpora- 
tion, was  too  faint  to  be  heard.  His  cause  was,  howeve*,  more 
just  than  is  that  of  the  corporation,  and  should  now  be  given 
its  place  on  the  calendar  and  a  speedy,  impartial  hearing. 

Corporations  are  abnormal  creations  which  government,  Frank- 

I  enstein-like,  brings  into  being  the  detriment  of  its  own  peace  and 

honor.     It  does  this  in  the  discharge  of  no  legitimate  function, 

206 


but  to  the  destruction  of  that  natural  freedom  of  individual  initia- 
tive in  the  employment  of  labor  and  capital,  which  it  is  a  prime 
duty  of  the  State  to  maintain. 

SECRETARY  REYNOLDS :  I  wish  to  ask  the  delegates  of 
certain  States  to  remain  after  this  meeting  and  select  their  rep- 
resentatives for  the  Committee  on  Resolutions,  so  that  without 
fail  the  committee  may  be  named  this  afternoon.  The  delegates 
requested  to  remain  are  those  from  Indiana,  Illinois,  Missouri, 
New  Jersey  and  Wisconsin. 

A  DELEGATE:  Mr  .Chairman,  I  would  like  to  move  that 
the  roll  of  States  be  called  at  the  coming  together  this  afternoon, 
by  the  Secretary,  and  that  the  delegates  from  the  States  name 
their  committeemen,  and  that  the  Chairman  at  that  timie  fix  the 
Committee  on  Resolutions. 

A  DELEGATE:  I  want  to  move  to  amend  that  the  fifteen- 
at-large  be  named  at  the  same  time. 

(The  mover  of  the  original  motion  accepted  the  amendment.) 

MR.  REYNOLDS :  I  would  like  to  say  that  all  but  four  States 
have  already  submitted  the  names  of  their  delegates ;  so  if  these 
States  give  their  names  it  will  not  be  necessary  to  go  through  the 
formality  of  calling  the  list. 

A  DELEGATE :  It  seems  to  me  it  would  be  well  to  have  a  call 
of  the  States. 

A  DELEGATE :  I  would  like  to  speak  to  the  motion,  I  being 
one  of  the  committee  of  fifteen  to  formulate  the  plans.  This 
matter  is  all  being  worked  out  by  the  committee.  It  has  been 
left  to  the  Committee  of  Five,  of  which  Mr.  Reynolds  was  the 
Secretary.  It  will  save  time  if  you  will  let  it  take  its  natural 
course.  The  delegates  from  the  four  States  named  will  name 
their  members  on  the  Committee  on  Resolutions ;  then  the  whole 
matter  will  be  announced  before  the  Conference  for  action. 

A  DELEGATE:  I  want  to  ask  a  question.  I  want  to  know 
whether  the  committeemen  from  the  States  have  anything  to 
say  in  this  matter  or  not. 

MR.  REYNOLDS :     It  is  the  understanding  that  the  dele- 

207 


gates  should  elect  their  own  members.  If,  upon  the  reading  of 
the  list,  any  delegate  sees  fit  to  question  the  list  he  will  have  the 
right  to  do  so. 

A  DELEGATE :  Mr.  Chairman,  if  it  is  likely  to  take  up  time, 
and  if  it  is  understood,  I  will  withdraw  the  motion. 

THE  CHAIRMAN:  You  can  renew  your  motion,  sir,  at  a 
later  time. 

MR.  REYNOLDS :  I  take  it  that  the  delegates  appointed  by 
the  Governors — 

A  DELEGATE:  I  happen  to  be  a  delegate  here  representing 
a  trade  organization.  I  doubt  very  much  whether  trade  organiza- 
tions should  have  a  voice  in  this  meeting.    I  trust  they  may  have — 

THE  CHAIRMAN :  If  you  wish  to  make  a  motion  that  trade 
organizations  be  represented  I  should  be  pleased  to  entertain  it. 
If  you  choose  to  put  your  remarks  in  the  form  of  a  motion,  you 
may  do  so.  The  members  of  this  Conference,  according  to  the 
rules  that  were  adopted  yesterday,  are  those  on  the  list  of  the 
National  Civic  Federation  first  handed  in.  It  does  not  matter 
whether  they  are  appointed  by  the  Governor  of  the  State  or  by 
trade  organizations  or  by  any  other  ostensible  authority.  Those 
on  the  original  list  are  all  members  and  are  entitled  to  vote  at 
the  Conference  to  appoint  a  State  Committee. 

MR.  WADE  H.  ELLIS:  Mr.  Chairman,  if  the  matter  requires 
a  motion,  I  would  move  that  in  selecting  delegates  to  this 
committee — 

THE  CHAIRMAN :  It  is  not  necessary  to  make  a  motion. 

Upon  motion,  the  meting  was  adjourned  until  2:15  P.  M. 


208 


Fifth  Session,  October  2$,  2  P.  M. 

The  Conference  was  called  to  order  by  Mr.  C.  P.  Walbridge,  at 
2  45  P.  M. 

THE  CHAIRMAN:  The  first  speaker  this  afternoon  is  As- 
sistant Attorney-General  Frank  B.  Kellogg,  of  Washington,  and 
his  topic  "The  Enforcement  of  the  Sherman  Anti-Trust  Law." 
Mr.  Frank  B.  Kellogg. 

Mr.  Chairman — Unfortunately  I  am  not  from  Washington  and 
I  am  not  an  Assistant  Attorney-General.  I  am  a  private  Amer- 
ican citizen,  and  as  such  if  what  I  say  is  worth  listening  to,  well 
and  good;  but  it  will  not  be  from  the  minor  official  position  I 
happen  to  hold  as  Special  Assistant  Attorney-General. 

One  of  the  vital  issues  before  the  American  people  to-day  is 
the  question  of  the  proper  enforcement  of  the  Sherman  Anti- 
Trust  Law.  The  great  majority  of  the  people  are  demanding 
this  enforcement  against  combinations  of  railroads  and  certain 
large  industrial  corporations  and  combinations  of  corporations 
called  "Trusts."  On  the  other  hand,  certain  classes  of  men — 
principally  interested  in  these  enterprises — are  denouncing  the 
Government  in  unmeasured  terms  for  the  effort  being  put  forth 
in  this  respect.  It  is  said  it  is  being  done  for  political  effect.  In 
my  opinion  this  is  not  true.  No  political  agitators  could  create 
such  a  widespread  and  deep-seated  sentiment.  Political  agitators 
drift  with  the  current ;  they  do  not  create  it.  No  movement  gains 
such  momentum  without  just  cause. 

CAUSES  OF  PRESENT  PANIC. 

Again,  we  hear  it  frequently  said  that  the  enforcement  of  the 
Sherman  Act  has  been  one  of  the  causes  of  our  present  financial 
depression.  In  my  opinion  nothing  is  farther  from  the  truth. 
For  ten  years  we  have  been  through  an  industrial  expansion,  an 
expansion  of  values,  and  credits,  beyond  any  period  in  our  his- 
tory. Vast  millions  of  stocks  and  securities  have  been  placed 
on  the  market,  and  prices  raised  to  abnormal  heights.  It  is  an 
inevitable  law  of  trade  that  the  time  always  comes  when  these 
prices  must  shrink.  The  shrinkage  of  prices  of  securities  causes 
a  lack  of  confidence  and  a  shrinkage  of  credit.    This  is  what  we 

209 


call  "scarcity  of  money."  As  a  matter  of  fact  it  is  not  a  ques- 
tion of  money  at  all,  but  a  question  of  credit;  and  the  want  of 
credit  has  in  all  times  of  our  history  come  with  depression  follow- 
ing abnormal  expansion.  It  is  fortunate,  indeed,  for  the  country 
that  the  foundation  of  our  industrial  and  commercial  life  is 
sound  and  that  the  people  are  prosperous.  We  never  have  been 
in  a  better  position  to  stand  the  inevitable  shrinkage  than  at  the 
present  time.  In  my  opinion,  however,  no  temporary  financial 
stress  will  turn  the  deliberate  judgment  of  this  people  away  from 
these  problems,  which  must  be  solved. 

To-day  the  Clearing  House  Committee  of  the  New  York  banks 
is  demanding  the  resignation  of  men  faithless  to  their  trust. 
That  is  what  the  President  of  the  United  States  is  doing  to  men 
and  corporations  unfaithful  to  their  public  duties.  Do  you  sus- 
tain him  in  this  cause?  Whether  you  do  or  not,  the  great 
majority  of  the  American  people  will,  and  they  are  not  wrong  on 
any  subject  for  any  great  length  of  time. 

These  movements  are  not  new  in  the  world's  history.  Man 
has  ever  been  struggling  against  the  evils  of  monopoly,  and  it  has 
always  been  the  case  that,  whether  under  the  guise  of  law,  or  by 
special  privileges  or  grants,  a  class  of  people  have  absorbed  the 
wealth  of  a  country,  or  its  industries — have  denied  to  their  fel- 
low men  the  equal  right  to  pursue  a  vocation  and  earn  a  liveli- 
hood— they  have  been  abolished  either  by  law  and  peaceful 
means  or  by  revolutions.  I  agree  with  the  distinguished  Chair- 
man of  this  meeting  that  these  questions  should  be  considered 
from  the  calm  level  of  deliberate,  unimpassioned  judgment. 
This  is  a  land  of  law  and  order,  and  of  law-abiding  people ; 
and  there  is  no  reason  for  hysteria  or  extravagant  denunciation. 
To  be  sure,  the  question  of  monopolies  comes  before  us  under 
entirely  different  circumstances  than  in  generations  gone  by. 
They  are  not  shielded  by  grants  from  the  Government.  They 
have  not  yet  reached  the  limit  of  seeking  to  monopolize  all  in- 
dustries, such  as  the  ownership  and  cultivation  of  the  land;  but 
under  the  guise  of  corporate  organizations — grants  of  perpetual 
power — they  have  sought  to  control,  and  in  some  instances  have 
controlled,  all  branches  of  certain  industries  in  this  country. 

The  questions  before  this  Convention  seem  to  be  whether  the 
Sherman  Act,  in  its  application  to  railroads  and  to  industrial  cor- 
porations, should  be  amended.  The  conditions  controlling  the.  two 
classes  of  corporations  are  to  some  extent  different  and  need 
separate  consideration. 


210 


SHERMAN   LAW  DESIGNED   TO   MAINTAIN   COMPETITION. 

The  object  of  the  Sherman  Law,  in  its  application  to  all  cor- 
porations and  enterprises,  was  to  maintain  those  reasonably  com- 
petitive conditions  which  have  been  potent  causes  in  the  develop- 
ment of  our  commercial  and  industrial  institutions,  and  to  prevent 
monopoly  which  would  exclude  the  people  from  a  reasonable 
participation  in  all  enterprises  and  business.  Let  us  briefly  con- 
sider the  application  of  the  Sherman  Act  to  railroads.  I  do  not 
believe  that  its  application  to  the  railroad  systems  of  the  country 
was  an  afterthought,  or  judicial  error.  The  time  was,  of  course, 
when  transportation  formed  but  a  small  part  of  the  commerce  of 
our  country.  The  products  of  the  farm  and  local  manufacture 
were  exchanged  in  the  nearby  markets.  But  rapid  communica- 
tion, the  construction  of  great  lines  of  railway,  have  entirely 
changed  the  industrial  conditions,  and  to-day  transportation  is  a 
legitim(ate  tax  upon  all  classes  of  business.  No  farmer,  no  mer- 
chant, no  manufacturer  can  carry  on  a  business  without  paying 
this  tax,  and  it  should,  therefore,  be  as  reasonable  and  as  uniform 
as  possible,  so  as  to  afford  all  equal  opportunities  to  engage  in 
business.  As  to  railway  systems,  the  American  people  have 
established  competition  between  competing  lines  of  railway  as 
the  rule  of  law  governing  these  corporations.  The  constitutions 
and  the  laws  of  more  than  forty  States  contain  provisions  pro- 
hibiting combination  or  control  in  one  corporation  of  competing 
systems. 

SERVICE  RENDERED  BY  COMPETITION  IN  RAILWAY  DEVELOP- 
MENT. 

And,  while  argument  may  be  made  against  this  as  unscien- 
tific, we,  as  practical  business  men,  know  that  independent  action 
and  reasonable  competition  between  the  lines  of  railway  in  this 
country  have  given  the  people  most  of  the  good  service  and  rea- 
sonable rates  which  they  are  enjoying  to-day  from  railway 
systems.  You  may  say,  as  some  railway  managers  do  say,  that 
all  of  the  railways  of  the  country  could  be  operated  more  econom- 
ically under  one  control  and  management,  so  long  as  the  Federal 
Government  will  exercise  over  them  that  supervision  which  will 
insure  reasonable  and  equal  rates,  privileges  and  good  service. 
But  we  overlook  the  fact  that  but  a  few  men  of  necessity  must 
control  the  systems  of  railways,  and  unless  we  are  prepared 
to  have  the  Federal  Government  take  over  practically  the  man- 

211 


agement  of  these  railways,  I  do  not  believe  we  are  ready  to  trust 
their  control  to  a  few  men,  for  men  are  ever  abusive  of  power 
and  can  no  more  be  trusted  in  the  unlimited  control  of  our  rail- 
way facilities  than  they  can  be  trusted  in  the  unlimited  control  of 
government.  Competition  between  railways  does  not  necessarily 
mean  ruinous  rate  wars.  It  has  three  aspects  :  The  legitimate  re- 
duction of  rates  in  order  to  reach  out  and  increase  the  business 
of  the  railway  system ;  good  transportation  facilities,  quick  ser- 
vice ;  and  the  construction  of  new  lines  of  railway  in  the  develop- 
ment of  the  country. 

Take  these  away  by  permitting  the  consolidation  of  all  lines 
of  railway,  and  the  Government  must  assume  the  obligation 
of  enforcing  these  duties.  Until  we  are  ready  to  do  this,  I  be- 
lieve that  Congress  should  maintain  the  separate  integrity  and 
management  of  naturally  competing  lines  of  railway  systems  in 
this  country,  and  to  that  end  should  prohibit  railway  companies 
from  acquiring  the  stock  of  competing  lines.  Railways  should 
not  be  permitted  to  engage  in  the  business  of  buying  stock  in  other 
lines  of  railway,  competitive  to  their  own  system.  It  is  a  power 
which  is  subject  to  abuse,  and  common  ownership  to  that  extent 
decreases  the  motive  for  furnishing  good  transportation.  I  do 
believe,  however,  that  in  some  respects  the  Sherman  Act,  in  its 
application  to  the  railways,  should  be  modified.  It  is  a  necessity 
for  railway  men  to  meet  and  consider  the  subject  of  competing 
rates.  It  is  impossible  for  various  systems  of  railroads,  more  or 
less  competitive  and  yet  reaching  many  different  markets  (which 
markets  are  competitive  between  themselves),  to  adjust  schedules 
of  rates  equitably  without  such  meetings,  consultations,  and  in  the 
first  instance  agreeing  upon  schedules  of  rates.  This  should,  how- 
ever, be  under  the  control  and  supervision  of  the  Interstate  Com- 
merce Commission,  and  should  be  limited  to  making  or  chang- 
ing the  rate  in  the  first  instance. 

RAILWAY  POOLS  SHOULD  NOT  BE  PERMITTED. 

It  is  not  necessary  that  railroads  should  be  permitted  to 
pool,  or  to  make  agreements  for  the  maintenance  of  rates,  in 
order  to  accomplish  this  result.  While  I  believe  in  a 
strong,  vigorous  Federal  control  of  railways,  I  am  not  ready  to 
commit  myself  to  the  doctrine  of  unlimited  combination  between 
railway  systems,  or  to  that  complete  Federal  or  State  control 
which  shall  take  under  governmental  supervision  all  the  details  of 

2T2 


the  construction  and  operation  of  the  railways  of  this  country. 
The  Government  should  not  engage  in  enterprises  which  can  be 
left  open  to  the  people.  Whatever  may  be  the  conditions  under  a 
limited  monarchy,  in  a  republic  I  believe  these  industries 
should  be  left  to  the  people.  Do  not  create  a  vast  army  of  de- 
pendent government  employes,  the  very  nature  of  whose  employ- 
ment renders  them  subject  more  or  less  to  political  control  and 
party  manipulation.  It  tends  to  political  corruption.  We  have  to- 
day the  cheapest  and  best  transportation  in  the  world.  It  may  be 
said  that  there  have  been  discrimination,  rebates  and  corruption  in 
the  management  of  railways.  Suppose  there  have.  Have  the 
people  not  rectified  them?  These  revelations  indicate  rather  a 
moral  awakening  and  a  determination  to  have  a  higher  plane  of 
business  morality.  Most  of  the  people  are  honest,  and  I  believe 
in  the  sterling  integrity  of  the  business  men  of  this  country. 

SHERMAN  ACT  AND  INDUSTRIAL  COMBINATIONS. 

As  to  industrial  corporations,  the  questions  are  in  my  opinion 
more  difficult  of  solution. 

What  was  the  object  of  the  Sherman  Act?  Before  we  can  ap- 
ply a  remedy  we  must  understand  the  evil.  Let  us,  therefore, 
for  a  few  moments  consider  the  cause  which  led  to  its  enact- 
ment, and  the  effect  of  the  great  combinations  in  the  form  of  cor- 
porations upon  our  industrial  life. 

In  the  early  days  of  our  national  life,  commerce,  as  we  have 
before  said,  was  very  largely  a  matter  of  local  exchange.  The 
want  of  means  of  transportation  facilitating  the  exchange  of  pro- 
ducts and  the  centralization  of  manufacture  made  it  impossible  to 
monopolize  an  industry.  But  in  time  rapid-transportation  facilities 
developed  and  became  the  most  important  factor  in  the  control 
of  our  industries.  Other  conditions  also  changed — mechanical 
devices,  the  enterprise  and  ingenuity  of  our  people  under  competi- 
tive force,  have  of  course  revolutionized  the  industrial  conditions 
of  this  and  other  countries.  The  tremendous  expansion  of  manu- 
facture, trade,  commerce  and  communication,  together  with  the 
consequent  expansion  of  the  capital  necessary  to  do  the  business, 
undoubtedly  rendered  necessary  to  a  certain  extent  the  com- 
bination of  capital  into  large  enterprises.  This  brought  the  cor- 
poration, as  as  instrument  for  uniting  the  efforts  of  many,  and 
perpetuating  a  joint  ownership  and  power  of  control.  As  corpor- 
ate control  of  the  industries  increased,  of  necessity  the  opportun- 

213 


ity  of  individual  enterprise  decreased.  The  corporation  enabled  a 
few  to  become  the  managers  of  great  institutions,  and  the  in- 
dividual was  more  and  more  eliminated  from  the  field  of  com- 
merce and  industry.  As  time  passed,  various  means  were  adopted 
in  order  to  aggrandize  the  corporation  and  to  eliminate  the 
competition  of  the  individual.  Among  other  means  was  to  con- 
trol the  transportation,  and  some  of  the  greatest  monopolies  of 
this  country  had  their  foundation  in  grants  of  special  privileges 
and  rates,  which  made  it  impossible  for  competitors  to  remain  in 
the  field.  A  grant  of  special  rates  and  privileges  by  a  railroad  is 
as  great  a  power  as  a  grant  of  monopoly  by  the  government,  be- 
cause it  is  as  impossible  for  a  competitor  to  exist  as  though  he  was 
barred  by  statute.  Other  means  were  used ;  the  combination  of 
individuals  and  corporations  to  limit  supply,  enhance  prices,  or 
limit  production  of  particular  concerns — by  which  to  gain  con- 
trol of  the  commerce.  But  the  most  effective  means,  aided  by 
special  privileges  from  the  railroads,  has  been  the  organization  of 
corporations  or  the  consolidation  of  independent  corporations 
engaged  in  business,  either  by  the  holding  company  acquiring 
stock,  or  by  some  means.  People  viewed  with  alarm  these 
aggregations,  gradually  absorbing  all  the  industries  of  the 
country,  the  control  of  which  were  centred  of  necessity  in  a 
few  men,  who  not  only  had  the  power  to  dictate  to  the  transpor- 
tation lines,  to  dictate  prices,  to  control  the  supply,  but  had  the 
power  through  systems  of  raising  prices  in  one  part  of  the 
country  and  lowering  them  in  another,  to  destroy  the  individual 
or  the  small  corporation  engaged  in  the  same  business.  Ex- 
perience has  shown  that  these  fears  were  not  without  foundation. 
The  result  has  been  that,  under  the  guise  of  various  corporate 
organizations  a  few  men  have  been  enabled  to  practically  mon- 
opolize an  entire  industry  and  drive  out  all  competition.  If  this 
is  economically  right,  if  it  is  the  necessary  result  of  our  civiliza- 
tion and  industrial  life,  then  why  should  it  not  be  extended  to 
all  industries  and  all  occupations? 

A  few  men  by  means  of  such  ingenious  corporate  organiza- 
tions, may  build  up  a  great  financial  institution,  may  perpetuate 
their  power,  and  reduce  the  great  majority  of  the  people  of  this 
country  from  progressive  independent  business  men  to  mere 
dependent  employes,  and  close  the  door  to  all  possible  hope  of 
themselves  or  their  children  ever  becoming  anything  else.  A 
system  which  makes  a  few  men  enormously  rich — with  the 
power  which  goes  with  wealth — and  reduces  the  balance  to  the 

214 


subservient,  menial  position  of  employe,  must  in  the  end  have 
a  disastrous  effect  upon  our  civilization. 

COMBINATION  NOT  A  RESULT  OF  ECONOMIC  CONDITIONS. 

But,  it  is  said  that  combination  is  an  economic  principle, 
against  which  it  is  useless  to  combat.  I  deny  that  many  of  the 
great  corporations  and  trusts  of  this  country  are  the  result  of 
economic  principles.  They  are  rather  the  result  of  the  genius 
and  cupidity  of  men  who  love  wealth  and  power,  and  who  have 
ever  been  abusive  of  power,  and  who  will  not  stop  in  their 
grasp  for  power  short  of  the  industrial  enslavement  of  their 
fellow  men.  Some  of  the  great  combinations  of  the  last  thirty 
years  which  reach  that  magnitude  we  call  "trusts"  or  "monop- 
olies, "  have  not  been  created  on  any  economical  basis.  They 
have  been  put  together  by  promoters,  upon  values  many  times 
either  their  intrinsic  worth  or  earning  value ;  upon  the  expecta- 
tion— which  in  many  instances  has  been  realized — that  the  pub- 
lic will  buy  their  securities,  and  that  they  may  make  enormous 
fortunes  and  control  great  industries.  We  are  not  afraid  of 
big  things  in  this  country.  Large  enterprises  are  necessary  in 
the  development  of  certain  industries,  notably  transportation 
lines.  But  it  is  one  thing-  for  men  to  combine  their  capital  in 
the  execution  of  enterprises  reauiring  large  capital  for  their 
consummation,  or  to  economicallv  carry  on  their  business ;  it 
is  another  thing  to  bring  together  separate  and  distinct  corpora- 
tions, enterprises  and  businesses  upon  a  fictitious  basis  of  value, 
to  be  sustained  through  the  power  of  monopoly  or  for  the  pur- 
pose of  crushing  out  competitive  concerns. 

Again,  it  is  said  that  such  combinations  are  economical  and 
reduce  the  prices  to  the  people.  If  it  were  true  it  would  not  be 
an  answer  to  the  proposition  I  make,  for  it  is  of  more  import- 
ance to  keep  open  to  the  people  the  avenues  of  industry  and 
individual  enterprise,  so  that  all  men  with  ability  and  reasonable 
capital  may  not  only  engage  in  business  with  reasonable  hopes 
of  success,  but  that  the  future  generations,  under  this  stimulant, 
may  grow  to  a  great  people.  But  it  is  not  true.  If  you  con- 
cede the  right  of  unlimited  combination,  it  gives  the  power  to 
control  supplies,  and  to  extort  unreasonable  prices,  and  in  the 
end  such  has  been  and  will  be  the  result. 

Again,  it  enables  a  few  men  to  amass  large  fortunes  and  to 
wield  a  nower  dangerous  to  the  State.  If  once  you  concede  the 
right  of  unlimited  combination   under  corporate  organization, 

21% 


there  is  nothing  to  prevent  a  few  men,  by  the  device  of  holding 
companies,  from  controlling  all  of  the  industries  of  the  country. 
Such  enormous  centralization  of  wealth  has  its  influence  upon 
our  finances,  our  banking  institutions,  our  transportation  lines, 
our  mediums  of  exchange,  and  our  very  political  organization. 
They  are  dangerous  to  the  State,  and  consequently  to  the  in- 
dividual. 

PROGRESS  NOT  RESULT  OF  COMBINATIONS. 

You  say  we  have  prospered  beyond  any  age  known  in  history. 
I  admit  it.  We  have  been  developing  a  new  country,  limitless 
in  its  resources.  New  factors  of  civilization  have  been  brought 
to  bear  upon  our  industrial  life  in  a  hundred  years,  and  it  is  un- 
doubtedly true  that  these  things  have  made  much  larger  enter- 
prises and  aggregations  of  capital  perfectly  legitimate  in  our 
industrial  life.  But  for  the  Sherman  Act,  or  like  enactments, 
there  would  be  no  limit  to  combination.  How  do  we  know  what 
would  have  happened  were  it  not  for  this?  The  great  mass  of 
the  people  are  powerless  to  prevent  it.  A  corporation  which 
controls  80  or  90  per  cent,  of  the  industries  scattered  over  the 
country  can  crush  out  feebler  efforts.  And  when  it  has  the  con- 
trol of  one  industry,  and  has  sufficient  wealth,  it  may  reach  out 
and  control  financial  institutions,  railroads  and  other  industries, 
for  in  the  ratio  in  which  it  grows  in  power  and  strength,  in  equal 
ratio  decreases  the  power  of  its  competitors.  We  have  not  yet 
reached  that  period  of  centralization  where  the  whole  people 
have  felt  the  oppressive  hand  of  monopoly.  I  ask  you,  how 
long  would  the  American  people  stand  it  if  a  set  of  men  under- 
took to  monopolize  the  ownership  of  the  land?  If  they  sought 
to  turn  this  country  into  a  country  of  landlordism  and  tenantry, 
if  they  undertook  to  turn  the  wheels  of  progress  back — to  own 
and  control  the  farms  and  homes  of  millions  of  people  and  re- 
duce them  to  a  state  of  peasantry?  The  mere  expression  of 
such  a  thing  would  be  considered  as  shocking  to  the  sense  of 
the  people.  And  yet,  if  you  once  concede  the  right  of  unlimited 
combination — if  you  follow  the  teachings  of  those  who  say  "We 
have  come  to  a  new  economic  era.  In  the  future  business  is  to 
be  carried  on  more  and  more  by  aggregations  of  capital;  it 
cannot  be  otherwise;  the  day  of  individual  competition  has 
passed  and  gone" — it  is  not  many  steps  to  the  extension  of  this 
economic  principle  to  the  ownership  and  cultivation  of  the  land 

216 


0f  fa^  oountry.  The  same  principle  applies  to  a  lesser  extent 
m  other  industries.  No  great  nation  springs  from  a  dependent 
and  subservient  people.  There  must  be  independence,  individ- 
ual enterprise,  proprietorship,  opportunities  for  business  enter- 
prise to  the  individual. 

The  people  of  this  country  have  demonstrated  the  evil  effects 
of  monopoly.  They  are  awakened  to-day.  The  alarm  has  gone 
forth,  and  it  remains  for  us  to  correct  its  evils  by  law  and  or- 
derly means,  or  they  will  be  corrected  by  means  more  radical. 
Do  you  wish  to  drive  this  people  into  Socialism,  where  they  will 
compel  the  government  to  take  possession  of  and  manage  the 
commerce,  the  manufactures,  all  the  industries,  the  cultivation 
of  the  soil  for  the  benefit  of  all?  If  you  do  not  wish  to  do  this, 
then  put  a  stop  to  the  power  of  unlimited  combination,  and  do 
it  by  orderly  means.  The  Sherman  Act  forbids  combinations  in 
restraint  of  trade  and  prohibits  monopolies.  No  corporation 
could  to-day  acquire  control  of  all  industries,  or  of  one  particu- 
lar industry  in  this  country,  without  the  power  of  unlimited  com- 
bination, and  when  it  obtained  this  it  would  have  a  monopoly. 
It  was  this  the  act  sought  to  prohibit. 

It  is  said  with  a  great  deal  of  force,  "Where  will  you  stop? 
You  deny  men  the  right  of  acquisition  of  property.  You  take 
away  from  them  the  principal  incentive  to  industry  and  thrift." 
I  would  not  take  away  from  men  any  such  right.  The  right  of 
acquisition  of  property  and  its  control  cannot  be  too  sacredly 
guarded.  But  combination  and  acquisition  by  the  means  I  have 
indicated  may  go  to  the  extent  of  endangering  the  individual 
right.  I  would  prohibit  the  unreasonable  combinations  in  re- 
straint of  trade,  and  those  combinations  or  acquisitions  which 
reach  the  degree  of  monopoly. 

DUTY  TO  THE  FEDERAL  GOVERNMENT. 

We  come  now  to  the  practical  question,  How  will  you  con- 
trol these  corporations  to  keep  them  within  proper  bounds? 
Shall  this  be  done  by  the  States  or  the  Federal  Government? 
Manifestly  only  the  Federal  Government  has  this  power.  It  is 
conceded  by  all  that  corporations  engaged  in  interstate  com- 
merce can  only  be  regulated  under  the  power  granted  to  Con- 
gress by  the  Federal  Constitution,  and  that  this  power  is  ex- 
clusive. No  one  denies  that  there  may  be  a  commerce  entirely 
within  the  State  which  is  exclusively  subject  to  its  control.  I 
do  not  advocate  any  extension  or  expansion  of  the   Federal 

217 


power.  In  the  control  of  corporations  as  instrument;,  nf  inter- 
state commerce  I  place  myself  squarely  upon  the  decision  oi 
that  great  expounder  of  the  Constitution,  Chief  Justice  Marshall. 
Congress  undoubtedly  has  power  to  regulate  corporations  en- 
gaged in  interstate  commerce.  It  may  limit  its  capital,  specify 
the  subjects  of  the  commerce  in  which  it  may  engage,  and 
provide  rules  and  regulations  for  its  control  and  an  examination 
into  all  its  affairs.  It  seems  to  me  unnecessary  at  this  time  to 
further  discuss  this  question  of  power.  As  the  great  commerce 
of  this  country  to-day  is  interstate,  the  Federal  Government 
can,  therefore,  effectually  deal  with  these  instrumentalities. 

The  next  question  is,  How  shall  we  regulate  these  corpora- 
tions? I  would  enforce  the  Sherman  Act  against  those  combina- 
tions that  have  sought  to  and  have  practically  monopolized  the 
commerce  of  the  country.  Until  a  more  effective  system  is 
created,  I  do  not  believe  it  is  wise  to  repeal  the  act,  or  lessen  the 
efficiency  of  its  enforcement.  The  same  end  might  possibly 
have  been  accomplished  by  other  means,  but  this  control  is 
evolutionary.  The  processes  by  which  we  arrive  at  these  con- 
clusions come  from  long  experience.  The  instruments  of  con- 
trol have  to  be  created,  born  of  a  necessity,  and  stand  the  test 
of  trial  and  experience.  The  Sherman  Act  sprang  from  a  de- 
mand to  redress  real  grievances.  Had  we  in  the  past  proper 
State  or  Federal  supervision  over  these  corporations,  no  such 
great  combinations  could  have  existed.  But  under  the  power 
of  unlimited  corporate  organization,  granted  by  the  State,  they 
were  easily  made  the  instruments  of  monopoly. 

CONTROL  THROUGH  PUBLICITY  AND  FEDERAL  LICENSE. 

(ist.)  I  believe  there  should  be  thorough  Federal  investiga- 
tion by  the  Department  of  Commerce  and  Labor  into  the  man- 
agement of  corporations,  together  with  the  widest  publicity. 
This  will  tend  to  prevent  unfair  practices  and  oppressive  meth- 
ods, by  which  corporations  have  been  enabled  to  crush  out  their 
competitors  and  obtain  a  practical  monopoly.  When  subjected 
to  the  light  of  investigation  and  public  scrutiny,  corporations 
cannot  obtain  preferences  in  transportation,  and  will  not  resort 
to  those  oppressive  means  of  unfair  competition  which  have 
been  such  potent  instruments  in  the  past. 

(2d.)  In  my  opinion  the  time  has  come  when  proper  limita- 
tions should  be  placed  upon  the  power  of  corporations,  by  Fed- 
eral license  or  Federal  incorporation.     By  this  means  a  reason- 

218 


able  limitation  may  be  placed  upon  the  capital  to  be  issued; 
they  may  be  compelled  to  do  business  in  the  open ;  to  devote 
their  surplus  to  the  legitimate  business  of  the  corporation.  One 
of  the  great  evils  of  to-day  i-s  the  power  these  corporations  have 
over  the  financial,  transportation  and  other  institutions  of  the 
country.  Take  a  corporation  with  a  surplus  of  a  half  a  billion 
dollars,  and  its  power  over  banks,  financial  institutions  and 
railways  is  almost  unlimited.  Their  resources  should  be  limited 
to  the  legitimate  business  for  which  they  are  created. 

Do  not  undertake  to  recommend  the  repeal  of  the  Sherman 
law  until  you  have  substituted  something  equally  effective  to 
prevent  unreasonable  corporate  aggrandizement. 

After  all,  there  is  no  question  that  the  time  has  come  when  a 
limit  must  be  placed  upon  the  size  of  corporations,  and  limita- 
tions upon  their  power.  We  should  approach  this  subject  with 
caution,  with  liberality — preserving  always  those  ancient  safe- 
guards for  the  preservation  of  the  rights  of  the  citizen. 

THE  CHAIRMAN:  The  Secretary  will  announce  the  Com- 
mittee on  Resolutions,  as  reported  by  the  delegations  from  the 
State  and  appointed  by  the  Chairman  of  the  Conference. 

MR.  REYNOLDS :  I  will  read  the  list  of  the  committee,  and  I 
am  requested  to  announce  that  the  Committee  on  resolutions  will 
meet  immediately  after  the  close  of  this  session,  for  organization, 
in  Room  200,  Hotel  Stratford,  and  it  is  urgently  requested  that 
every  member  be  present  at  that  meeting. 

The  Committee  on  Resolutions  is  constituted  as  follows  : 

MEMBERS  AT  LARGE. 

SETH  LOW Publicist New  York. 

SAMUEL  GOMPERS President  Ameri- 
can Federation  of 
Labor Washington,  D.  C. 

C.  H.  SMITH President     Illinois 

Manufacturers' 

Association Chicago,  III. 

JAMES  M.  LYNCH President  Inter- 
national Typo- 
graphical Union. .  .Indianapolis,  Ind. 

JOHN  M.  STAHL Farmers'  Congress. Chicago,  III. 

GEORGE  W.  PERKINS President  Inter- 
national Cigar 
A  lakers'  Union Chicago,  III. 

219 


FRANKLIN  MacVEAGH Wholesale  Grocer.  Chicago,  III. 

A.  T.  ANKENY Attorney-at-Law . .  Minneapolis,  Minn. 

JAMES  O'CONNELL President  Inter- 
national Associa- 
tion of  Machinists.  Washington,  D.  C. 

JOHN  F.  CROCKER President  Cham- 
ber of  Commerce. .  Boston,  Mass. 

FRANK  DUFFY General    Secretary 

United  Brother- 
hood of  Carpen- 
ters and  Joiners 
of  America Indianapolis,  Ind. 

WILLIAM  JAY  SCHIEFFELIN. . .  .National  Associa- 
tion of  Wholesale 
Druggists New  York. 

DANIEL  J.  KEEFE President  Inter- 
national Long- 
shoremen, Marine 
and  Transport 
Workers'  Associ- 
ation   Detroit,  Mich. 

PROF.  J.  LAURENCE  LAUGHLIN  .University  of 

Chicago Chicago,  III. 

A.  T.  STEBBINS National   Retail 

Hardware  Associ- 
ation   Rochester,  Minn. 

MEMBERS  SELECTED  BY   STATE  DELEGATIONS. 

JOHN  W.  TOMLINSON Alabama. 

G.  W.  HULL Arizona. 

CHARLES  S.  THOMAS Colorado. 

IRVING  FISHER Connecticut. 

J.  HOWARD  GORE District  of  Columbia. 

J.  W.  ARCHIBALD Florida. 

AVERY  C.  MOORE Idaho. 

JOHN  V.  FARWELL,  JR Illinois. 

JOHN  H.  HOLLIDAY Indiana. 

F.  L.  MAYTAG Iowa. 

JAMES  W.  ORR Kansas. 

GEORGE  L.  SEHON Kentucky. 

THEODORE  MARBURG Maryland. 

DR.  FRED  WILLIAM  HAMILTON Massachusetts. 

GEORGE  H.  BARBOUR Michigan. 

JOHN  W.  WILLIS Minnesota. 

ROBERT  H.  WHITELAW Missouri. 

WALTER  L.  LOCKE Nebraska. 

NAHUM  J.  BACHELDER New  Hampshire. 

HOWARD  H.  WOOD New  Jersey. 

J.  H.  BEARRUP New  Mexico. 

DR.  ALBERT  SHAW New  York. 

D.  A.  TOMPKINS North  Carolina. 

ALLEN  R.  FOOTE Ohio. 

220 


DAVID  P.  MARUM Oklahoma. 

GEORGE  LANGFORD Oregon. 

TALCOTT  WILLIAMS Pennsylvania. 

J.  A.  PICKLER South  Dakota. 

JAMES  S.  MEAD Tennessee. 

F.  G.  HOWLAND Vermont. 

WYNDHAM  R.  MEREDITH Virginia. 

JAMES  C.  LAWRENCE Washington. 

JAMES  M.  PAYNE West  Virginia. 

WILLIAM  GEORGE  BRUCE Wisconsin. 

NELLIS  CORTHELL Wyoming. 

THE  CHAIRMAN :  It  gives  me  pleasure  now  to  present  the 
Hon.  Peter  S.  Grosscup,  of  Chicago,  who  will  speak  on  "Anti- 
Trust  Laws." 

Hon.  Peter  S.  Grosscup. 

Mr.  Chairman — We  are  now  well  into  the  eighteenth  year 
since  the  passage  of  the  Sherman  Anti-Trust  Act,  and  well  into 
the  seventh  year  since  Mr.  Roosevelt's  administration  began  ac- 
tively to  enforce  it. 

Thus,  so  far  as  enactments  make  law,  there  has  been  a 
prohibitory  law  against  the  so-called  trusts  or  big  corporations 
for  nearly  five  times  the  length  of  time  it  took  to  fight  out 
the  civil  war;  and  so  far  as  a  sincere  and  vigorous  purpose  to 
enforce  law  results  in  actual  enforcement,  the  battle  line  against 
the  so-called  trusts  or  big  corporations  has  been  in  action  for 
nearly  twice  as  long  as  it  took  to  fight  out  the  civil  war. 

In  its  means  of  enforcement,  as  well  as  in  its  purpose,  the 
Sherman  act  was  as  comprehensive  as  language  could  make  it. 
It  withheld  no  power,  civil  or  criminal,  that  the  lawmakers 
thought  would  contribute  to  the  complete  eradication  of  the 
supposed  evil.  It  had  been  preceded  in  Texas,  Kansas,  Michi- 
gan and  Maine  by  State  laws  directed  to  the  same  end,  and  was 
quickly  followed  by  like  laws  in  one-half  of  the  other  States, 
including  New  York,  Ohio,  Indiana,  Illinois,  Wisconsin,  Iowa 
and  the  West  generally. 

OUR  INEFFECTIVE  STRUGGLE  AGAINST  TRUSTS. 

Have  the  so-called  trusts  or  big  corporations  been  exter- 
minated? Have  they  been  even  diminished?  Has  the  Sherman 
act  brought  about  any  decrease  in  the  cost  of  living  or  any 
increase  in  wages?  Has  the  process  of  combining  ceased?  Has 
any  specific,  practical  purpose  of  the  Sherman  act,  not  present 

221 


in  the  law  as  it  has  existed  for  centuries,  been  fulfilled?  On  the 
contrary,  were  I  to  call  the  roll  of  the  so-called  trusts  or  big 
corporations,  organized  since  the  Sherman  law  went  into  effect, 
I  would  be  naming  the  largest  ones  in  America  to-day,  an 
inspection  made  for  me  of  a  list  of  one  hundred  and  twelve  of 
the  leading  so-called  trusts  or  big  corporations  showing  that 
all  but  thirteen  have  been  organized  since  the  passage  of  that 
act.  And  if  it  be  said  that  this  is  because  the  Sherman  act,  until 
the  past  six  years,  was  treated  as  a  dead  statute,  I  ask,  How 
many  of  the  so-called  trusts  or  big  corporations  have  been  ex- 
terminated, or  even  diminished — what  increase  has  there  been 
in  wages  or  decrease  in  the  cost  of  living — by  what  is  admitted 
on  all  hands  to  have  been  a  sincere  and  vigorous  attempt  to 
enforce  the  law  during  the  administration  of  President  Roose- 
velt? Injunctions  have  issued  against  the  several  packing  houses 
that  make  up  the  meat  industry,  and  here  in  Indiana  against 
certain  concerns  in  the  drug  business,  and  against  certain  other 
so-called  trusts  throughout  the  country;  but  in  no  case  have 
these  so-called  trusts  or  big  corporations  been  exterminated ;  in 
no  case  have  wages  or  prices  been  affected ;  in  no  case,  except 
in  minor  detail,  has  anything  been  done  that  could  not  have 
been  done  as  effectually  under  the  common  law  that  was  in 
existence  before  the  Sherman  act  went  into  effect — that  could 
not  be  done  against  individuals  as  well  as  against  corporations ; 
and  though,  in  this  respect,  perhaps,  the  case  of  the  Northern 
Securities  Company  is  an  exception,  even  in  that  case  the  sev- 
eral railroads  that  made  up  the  Securities  Company  are  managed 
now  almost  precisely  as  they  were  before  the  order  of  dissolution 
was  entered. 

If,  then,  the  enactment  of  the  Sherman  Anti-Trust  act  was 
intended  to  exterminate  the  so-called  trusts  or  big  corporations, 
or  to  affect  wages  or  prices,  manifestly  the  Sherman  Act  has 
failed.  If  the  entrance  of  Mr.  Roosevelt's  administration  upon 
a  vigorous  enforcement  of  that  law  was  intended,  as  some  of 
his  more  radical  followers  constantly  give  out,  to  exterminate 
the  so-called  trusts  and  big  corporations,  manifestly  that  feature 
of  Mr.  Roosevelt's  administration  has  failed.  The  organization 
of  industry  into  corporate  form  does  not  cease.  Neither  wages 
nor  prices  change.  That  much,  at  least,  has  been  proven.  And 
the  reason  that  the  organization  of  industry  in  corporate  form 
is  not  ceasing,  is  because,  as  an  effective,  industrial  agency  to 
wield  the  energies  of  mankind,  the  corporate  form,  beyond  any 

222 


other  form,  is  the  most  effective  yet  discovered.  What  govern- 
ment is  to  mankind  politically  organized,  the  corporation  is  to 
modern  industry  organized.  It  is  on  that  account  that  the  cor- 
poration is  here  at  all;  and  it  is  on  that  account  that  it  is  here 
to  stay.  And  not  until  men,  in  their  general  relations  to  each 
other,  can  safely  dispense  with  government,  will  come  a  time 
when  nuen,  in  their  industrial  relations,  can  safely  dispense  with 
industrial  organization. 

OUR  LEGISLATION  WRONG  IN  PRINCIPLE. 

But  though  what  I  am  saying  means,  perhaps,  that  the  aim 
of  the  American  public  thus  far,  in  its  treatment  of  incorporated 
industry,  is  not  directed  toward  the  right  mark,  it  does  not 
mean,  that  in  the  great  new  industrial  life  that  this  generation 
of  men  is  living,  so  largely  an  incorporated  life,  there  is  nothing 
that  is  wrong.  Somewhere  in  that  life,  something  is  wrong;  for 
though  in  the  midst  of  material  prosperity,  the  country  is  with- 
out contentment;  and  there  must  be  something  wrong  in  a 
prosperity  that  does  not  bring  contentment — something  that,  in 
the  nature  of  things,  in  some  way  pinches  and  wounds  some 
deep-seated  human  instincts.  Nor  does  it  mean  that  the  ad- 
ministration of  President  Roosevelt  has  been  a  failure.  As  a 
preparation  of  the  public  mind  for  the  great  practical  thing  yet 
to  be  accomplished,  that  administration  has  been  a  great  suc- 
cess. 

CORPORATIONS  REPRESENT  CONCENTRATED  CONTROL. 

What,  then,  is  the  wrong  that  lies  at  the  bottom  of  the  popu- 
lar disquiet,  and  what  is  the  work  yet  to  be  done?  I  can  best 
answer  that  question,  perhaps,  in  the  statement  of  three  facts. 
The  first  of  these  is :  that  not  only  is  the  corporation  to  modern 
industry  organized,  what  government  is  to  mankind  politically 
organized,  but,  that  as  it  is  through  effective  free  government 
alone  that  political  power  is  diffused  among  the  people,  it  is 
through  the  corporation  alone  that  the  ownership  of  the  in- 
dustries of  the  country  can  ever  be  widely  diffused  among  the 
people ;  for  outside  the  field  of  agricultural  properties,  property 
is  not  now  held,  each  individual  piece  by  some  individual  man; 
between  the  man  who  seeks  to  own,  and  the  thing  to  be  owned, 
there  is,  throughout  the  industrial  field,  the  State-created  inter- 
mediary called  the  corporation. 

223 


DIFFUSION  OF  WEALTH  IN  THE  UNITED  STATES. 

The  second  fact  is,  that  though  the  industrial  property  of  the 
country  is  not  widely  diffused  among  the  people,  the  people  have 
the  financial  means  to  bring  about  such  diffusion — that  it  is 
on  their  individual  wealth,  poured  through  the  financial  streams 
into  Wall  Street,  that  all  the  great  corporations  now  chiefly 
rest. 

In  the  last  annual  report  of  the  Comptroller  of  the  Currency 
it  is  stated  that  there  are  in  operation  in  the  United  States 
twenty-one  thousand  three  hundred  and  ninety-six  banks  and 
banking  institutions,  with  total  deposits  of  twelve  billion  six  hun- 
dred and  twenty-eight  millions  seven  hundred  and  twenty-seven 
thousand  six  hundred  and  sixty-five  dollars.  This  does  not 
include  redeposits  by  one  banking  institution  in  another;  nor 
does  it  include  the  large  sums  held  by  life  insurance  companies 
in  trust  for  their  policy  holders.  What  this  huge  total  of  nearly 
thirteen  billion  dollars  does  represent  is  the  individual  wealth  of 
the  American  public,  that,  uninvested  in  the  property  of  the 
country  by  the  depositors  directly,  is  put  in  the  financial  institu- 
tions of  the  country,  from  which  it  is,  of  course,  eventually 
taken  out  for  investment,  chiefly  by  those  who  borrow  it  for 
that  purpose. 

To  some  extent  these  deposits  represent  what  we  call  the 
working  capital  of  the  country — the  particular  amounts  that 
the  merchant,  the  manufacturer,  the  railway  company,  and  other 
individual  depositors  always  keep  on  hand  in  bank,  to  meet 
their  current  needs ;  and  to  some  extent  these  deposits  are  kept 
in  the  bank  vaults  as  reserve.  But  compared  with  the  whole, 
neither  this  reserve  nor  this  working  capital  is  considerable. 
Inquiry  of  one  of  the  greatest  of  the  railroads,  whose  securities 
at  present  market  values  are  between  three  and  four  hundred 
million  dollars.,  disclosed  that  that  road  carries  an  average  bank 
balance  of  about  one  million,  or  less  than  one  dollar  for  every 
three  hundred  of  its  market  value.  Inquiry  of  a  leading  mer- 
chant shows  that  his  average  bank  balance  is  proportionately 
larger  than  this,  but  considerably  less  than  one  dollar  in  one 
hundred  of  the  value  of  his  establishment.  The  largest  average 
bank  balance  carried,  as  working  capital,  that  I  have  discovered, 
is  that  of  the  largest  manufacturing  corporation  of  the  United 
States — the  United  States  Steel  Company — a  corporation  that, 
beginning  with  the  raw  material,  turns  it  over  again  and  again 
until  the  finished  product  is  delivered  to  the  purchaser — in  that 

224 


way  plainly  calling  for  the  largest  kind  of  cash  capital.  But  even 
here  the  ratio  of  bank  balance  to  the  total  value  of  the  proper- 
ties is  only  one  in  eighteen ;  so  that  assuming  that  the  enterprises 
of  the  country  that  require  distinctive  working  capital  are  of 
the  value  of  fifty  billion  dollars — nearly  one-half  of  the  country's 
entire  wealth — the  bank  deposits  representing  such  working 
capital  cannot  much  exceed  one  billion  of  the  nearly  thirteen 
billion  dollars  that  constitute  the  total  of  the  deposits — an 
estimate  unaffected,  too,  by  the  fact  whether  such  working- 
capital  is  first  borrowed  from  the  bank  and  then  redeposited,  as 
is  often  the  case,  or  is  in  the  first  instance  deposited  out  of  the 
depositor's  own  ready  means.  The  truth  is,  that  the  great  bulk 
of  the  thirteen  billion  dollars — a  deposit  without  example  any- 
where else  in  the  world,  is  either  utilized  by  the  banks  them- 
selves, in  their  business  of  buying  bonds  in  large  quantities  and 
selling  them  out  at  retail,  or  is  loaned  by  the  banks  to  those 
who  are  doing  the  actual  business  of  the  country,  and  carrying 
the  corporate  securities  of  the  country.  Or,  stated  in  another 
way,  the  American  people  have  to-day  in  bank  a  sum  of  money 
unemployed  for  investment  directly  by  themselves,  but  em- 
ployed by  a  comparatively  small  borrowing  class,  that  nearly 
equals,  at  their  present  miarket  prices,  the  value  of  all  the  rail- 
roads of  the  country  put  together — stocks,  bonds  and  all ;  and 
that  increase  by  what  the  people  of  the  country  individually 
hold,  in  the  way  of  bonds,  stocks  and  other  corporate  securi- 
ties, constitutes  almost  the  entire  wealth  on  which  the  corporate 
business  of  the  country  actually  rests.  So  much  then  for  this 
great  fact — the  fact  that  were  all  the  banks  and  saving  socie- 
ties to  liquidate  at  once,  paying  back  to  the  depositors  at  their 
present  market  prices,  the  corporate  securities  into  which, 
through  the  small  borrowing  class,  a  great  part  of  these  de- 
posits have  gone,  there  would  immediately  turn  up  throughout 
every  quarter  of  the  country,  and  in  direct  possession  and  own- 
ership of  those  of  our  people  who  have  saved  anything  at  all, 
in  addition  to  the  corporate  bonds  and  stocks  already  held  by 
them,  so  large  a  part  of  the  remaining  corporate  securities,  that 
it  could  be  truthfully  said  that  the  owners  of  the  property  of 
America  were  the  people  of  America — the  property  that  is  in- 
corporated as  well  as  the  property  that  is  unincorporated. 

225 


PEOPLE  HAVE  NO  MEANS  OF  SECURING  AN  INTEREST  IN  COM- 
BINATIONS. 

The  third  fact  is,  that  the  people's  lack  of  ownership  in  the 
incorporated  property  of  the  country  is  not  because  the  men 
and  women  who  have  saved  something  have  no  wish  to  set  these 
savings  at  work  for  something  more,  nor  that  the  workman  and 
employe  have  no  wish  to  have  some  proprietary  part  in  the  en- 
terprise to  which  they  are  attached,  but  chiefly  because,  as  the 
corporation  is  now  organized  and  managed,  there  is  no  reason- 
ably secure  way  to  set  such  savings  at  work,  or  to  acquire  such 
part.  Toward  the  general  diffusion  among  the  people  of  incor- 
porated property,  both  the  national  government  and  the  States 
thus  far  have  been  entirely  indifferent.  They  have  acted  as  if, 
having  invited  settlers  into  some  fertile  new  region,  the  hands 
of  the  States  and  nation  were  at  once  withdrawn,  leaving  the 
land  without  law.  It  is  indeed  a  thousand  times  worse  than 
that,  for  such  a  region  would  be  small  and  remote,  while  the 
region  covered  by  the  corporations  of  the  country  is  bounded 
only  by  the  nation's  boundaries,  and  lies  close  at  every  man's 
door.  At  every  turn  of  the  year  we  see  some  part  of  this  region 
of  incorporated  property  ravaged— during  the  past  few  months 
deeply  ravaged— but  we  stand  still,  never  thinking,  perhaps,  that 
it  is  on  account  of  just  such  ravages,  and  of  the  indifference  of 
our  national  and  State  goverment,  that  the  country's  richest 
property  field  is  effectively  withdrawn  from  popular  occupation 
— that  the  whole  institution  of  private  property  is  suffering 
shocks  that  may  eventually  wreck  it. 

There  is  still  another  fact  that  must  not  be  overlooked,  and 
that  is,  that  competition  will  never  be  effectually  restored  until 
the  capital  of  the  country,  springing,  as  it  does,  from  every 
quarter  of  the  country,  and  from  the  energy  and  frugality  of  all 
her  people,  is  at  the  call,  not  of  those  who  would  suppress  com- 
petition, but  of  those  who  would  encourage  it;  and  that  this 
will  never  be  the  case  until  the  corporation,  the  only  medium 
through  which  capital  can  effectively  be  wielded,  becomes,  in 
the  eyes  of  the  people,  a  trustworthy  medium  for  the  wielding 
of  the  people's  wealth  and  energy. 

What,  then,  is  the  work  that  confronts  us?  Should  we,  for 
the  sake  of  election  tactics,  be  content  to  merely  denounce  or 
hawk  at  this  industrial  institution?  Should  We  follow  those  so- 
called  leaders  who  think  that  what  it  took  the  human  race  all 
its  lifetime  to  build  up  can  be  taken  down  in  a  day  and  without  a 

226 


jar?    They  have  had  the  centre  of  the  stage  for  a  good  while 
back  and  nothing  practical  has  yet  been  accomplished. 

Should  we,  on  the  other  hand,  go  over  to  those  who  would 
leave  the  whole  problem  to  time  to  work  out — who  would  do 
nothing  for  fear  that  conditions  might  be  disturbed?  It  is  out 
of  this  do-nothing  policy — this  unrestricted  license  that  has 
prevailed — that  the  problem  has  risen.  But  for  that  license  the 
corporation  scandals  that  confront  us  would  not  have  been. 
Had  the  corporations  been  known  trustworthy  institutions  the 
wealth  of  the  country,  instead  of  being  poured  into  Wall  Street, 
would  have  been  expended  elsewhere  in  the  development  of  the 
country's  industries — each  community  depending  much  more 
largely  upon  itself  for  the  means  of  working  out  its  own  de- 
velopment. And  had  our  development  proceeded  on  such  lines, 
the  bank  failures  that  have  been  startling  us  for  the  last  few 
days  would  not  have  occurred,  for  in  nearly  every  instance  such 
failure  has  been  due  to  some  overleaping  personal  ambition 
having  too  easy  access  to  great  money  deposits.  No,  no.  The 
work  to  be  done  is  not  to  tear  down,  nor  yet  again  to  let  alone. 
The  work  to  be  done  is  to  reform — if  need  be,  to  rebuild — this 
intermediary  between  the  country's  wealth  and  the  country's 
industries ;  to  readjust  it  to  the  American  instinct  for  fair  play 
and  for  every  man  having  a  fair  part  in  the  affairs  of  life. 

NATIONAL  COMMISSION   ON   CORPORATION   REFORM   NEEDED. 

The  detailed  form  that  the  work  of  corporate  reconstruction 
should  take  would  be  best  performed,  perhaps,  by  a  national 
commission,  and  such  a  commission  would  have  for  precedent 
the  work  done  by  Germany  thirty  years  ago — a  corporate  re- 
form that  has  almost  disarmed  German  Socialism,  except  as  an 
agitation,  against  the  unjust  land  laws  of  that  country.  I  shall 
not  go  into  details  now,  but  will  confine  myself  to  those  funda- 
mental principles  that  in  their  nature  must  lie  at  the  foundation 
of  the  new  corporate  structure. 

In  this  country  the  corporation  is  a  creature  of  the  executive 
department  of  the  several  States,  and  issues  out  of  such  depart- 
ment almost  as  a  matter  of  course.  Neither  the  object  for  which 
the  corporation  is  formed,  nor  the  amount  of  its  capitalization, 
nor  the  character  of  the  securities  issued  commands  any  prelim- 
inary attention  other  than  such  as  is  merely  perfunctory.  Put 
your  nickel  in  the  slot  and  take  out  a  charter,  is  the  invitation 
that  the  States  extend;  and  in  line  before  the  slot  machine,  en- 

227 


titled,  too,  to  an  equal  place  in  the  line,  are  the  corporate  projects 
conceived  to  defraud,  as  well  as  those  that  have  an  honest  pur- 
pose. Neither  is  detained  by  so  much  as  an  inquiry.  For  in- 
difference such  as  that  I  would  substitute  at  the  very  threshhold 
of  the  corporation's  application  for  existence  an  honest,  careful 
inquiry  by  some  tribunal  of  government — a  tribunal  that  will  act 
only  after  it  has  heard;  a  hearing  in  which  the  public  is  repre- 
sented by  a  District  Attorney  on  whom  is  thus  devolved  the  duty 
not  merely  of  pursuing  the  horse  after  it  is  stolen,  but  of  seeing 
to  it  that  the  door  is  locked  before  the  horse  is  stolen.  And  what 
honest  project,  I  ask,  can  object  to  such  an  inquiry? 

ORIGIN   OF  FALSE  CAPITALIZATION. 

The  corporation  as  at  present  organized  by  the  States  has 
license  to  issue  all  the  securities  it  chooses,  and  all  the  kinds  of 
securities  it  chooses — securities  whose  place  in  the  corporate  geo- 
logic stratification  no  ordinary  mind  can  locate ;  and  out  of  this 
have  come  the  many  instances  of  capitalizations  that  serve  no  pur- 
pose other  than  to  exploit  with  one  hand  the  consuming  public, 
while  baiting  with  the  other  that  portion  of  the  public  that,  with 
hard-earned  savings,  is  looking  for  some  opportunity  to  help  it- 
self along  in  the  race  of  life.  No  honest  project  needs  license  like 
that.  Let  the  initial  securities  issued  be  related  in  a  fair  business 
way  to  the  actual  values  put  in. 

Incorporated  enterprise,  just  as  private  enterprise,  should  be 
given  room  to  grow.  A  dollar  turned  into  two,  ten,  twenty,  if 
turned  honestly,  wrongs  no  one.  Go  forth,  increase  and  multiply, 
is  a  command  without  which  economic  progress  would  not  be.  But 
in  all  this  there  is  no  need  that  the  corporation  should  initially 
capitalize  a  projected  success  that,  if  it  exists  at  all,  exists  only 
in  the  future.  Let  the  securities  issued  on  account  of  success  be 
issued  only  when  success  is  established ;  and  let  them  be  fairly 
related,  as  the  enterprise  grows,  to  the  increased  value  of  the 
actual  earning  power  developed.  And  I  can  see  no  reason  why 
in  any  honest  enterprise  the  question  whether  additional  securities 
shall  be  issued  should  not  be  made  the  subject  of  judicial  inquiry. 

But  the  restriction  of  capitalization  to  figures  that  are  fair  will 
accomplish  little  if  the  declaring  and  paying  of  unearned  divi- 
dends be  left  to  those  who  are  in  control  of  the  corporations;  for 
it  is  not  on  the  par  value  of  securities,  but  upon  the  size  and  reg- 
ularity of  dividend  payments,  that  the  public  makes  up  its  judg- 
ment as  to  values;  and  it  is  not  on  mere  capitalization  that  the 

228 


schemer  in  corporate  securities  counts,  but  upon  his  ability  to 
make  the  public  believe  that  the  capitalization  has  an  earning 
power.  Take  the  well-known  case  of  some  of  the  Chicago  trac- 
tion companies.  Without  dividends  the  securities  issued  would 
have  remained  near  zero,  and  that,  too,  irrespective  of  how  small 
the  issue  was ;  but  with  high  dividends,  paid  year  after  year  until 
they  were  no  longer  questioned,  the  securities  rose  in  the  stock 
markets  to  par,  to  double  par,  and  beyond  that,  irrespective  of 
how  large  the  issue  was.  It  was  not  the  capitalization,  but  the 
high  dividends  regularly  paid  for  a  long  period  that  did  the  trick ; 
not  real  dividends  in  any  honest  application  of  that  word  to  earn- 
ings, but  trick  dividends — dividends  that  stripped  the  enterprise  of 
its  power  to  keep  up  with  its  public  duty ;  that  let  the  enterprise 
gradually  but  surely  run  down,  and  that  borrowed  millions  for 
dividends  on  the  top  of  the  depletion.  Indeed,  the  whole  trans- 
action was  a  moral  crime — a  crime  that  robbed  honest  men  and 
women  of  the  accumulations  of  a  lifetime — a  crime  that  is  not 
fully  expiated,  either,  by  arraigning  before  the  bar  of  public 
opinion  the  men  who  got  away  with  the  plunder.  I  arraign  as 
accessory  before  the  fact  the  people  of  the  great  State  who, 
scrupulously  honest  in  their  individual  dealings,  issued  to  the 
projectors  of  this  crime  the  ready-made  corporate  weapon  with- 
out which  the  crime  could  not  have  been  committed. 

WORKERS  SHOULD,  IF  POSSIBLE,  BE  PART  OWNERS. 

One  thing  more  in  the  line  of  structural  principles.  The  first 
duty  of  every  enterprise,  incorporated  or  private,  is  to  secure  to 
the  capital  invested  its  eventual  safe  return,  while  paying  on  it 
from  time  to  time,  after  payment  of  operating  expenses,  such  fair 
returns  for  its  use  as  the  nature  of  the  venture  suggests.  That  is 
what  capital  always  has  the  right  to  ask.  But  this  having  been 
accomplished,  there  are  some  enterprises  now  that  take  labor  and 
management  into  partnership  in  the  further  disposition  of  the 
fruits  of  success.  That  kind  of  partnership  is  not  compulsory, 
and  is  not  usual.  I  would  not  make  it  compulsory,  but  I  would 
try  to  infuse  into  the  corporation  of  the  future  an  incentive  and 
a  spirit  that  would  make  it  more  usual — that  would  give  to  the 
workman,  the  clerk,  the  employe  of  every  kind  an  opportunity  to 
individually  share  in  the  growth  of  the  enterprise  to  which  he  is 
attached.  This  is  not  a  mere  philanthropic  dream.  The  spirit 
will  come  when  the  employe  feels  that  what  he  gets  he  gets  as  a 
matter  of  contract,  not  as  a  matter  of  gift,  and  is  as  secure  therein 

229 


as  is  the  corresponding  interest  of  the  employer;  and  when  the 
employer  wakes  up  to  the  truth  that  as  it  is  not  by  bread  alone 
that  men  live,  it  is  not  for  bread  alone  that  men  put  forth  their 
best  work.  And  the  incentive  may  be  supplied  by  the  applica- 
tion of  those  well-known  powers  of  taxation  that  instead  of  be- 
ing wholly  directed  toward  transferring  to  the  government  a  part 
of  the  success  of  the  successful,  could  be  employed  to  bring  about 
a  wider  diffusion  of  the  permanent  fruits  of  success  among  those 
who  by  their  labor  had  contributed  to  the  success.  This  is  not 
Socialism.  It  may  have  the  philanthropic  spirit  of  Socialism,  but 
in  its  end  and  aim  it  is  the  antidote  of  Socialism — in  any  long 
look  ahead  the  only  antidote  on  which  individualism  can  securely 
rely. 

Do  not  misunderstand  me — there  is  no  way  known,  before  men 
or  under  Heaven,  to  legislate  men  into  the  possession  of  any- 
thing. All  we  can  do  is  to  open  the  door — to  hold  out  the  op- 
portunity. But  that  done — honestly,  effectively  done — I  rely  on 
the  instincts  of  the  American  to  do  the  rest. 

I  stood  once  on  a  battleship,  marvelling  at  what  the  lightnings 
did.  They  lifted  and  lowered  the  anchor ;  they  ran  messages 
from  the  pilot  house  to  the  engine  room ;  they  lifted  the  ammu- 
nition from  the  magazine  to  the  guns ;  they  loaded  the  guns, 
leveled  them  to  the  mark  aimed  at,  fired  therm ;  they  lighted  the 
ship  when  in  friendly  waters  and  darkened  her  when  in  the  waters 
of  the  enemy ;  without  a  moment's  intermission  they  swept  the 
seas  for  a  thousand  miles  around  in  search  of  whatever  tidings 
the  circle  of  a  thousand  miles  might  have  ;  and  through  it  all  they 
remained  as  free  as  the  lightnings  that  play  in  the  summer  clouds. 
The  genius  of  man  has  not  harnessed  the  lightnings ;  they  work 
out  his  task  only  because  the  genius  of  man  has  given  them  the 
material  agency,  the  open  door  through  which  to  work  out  their 
own  inherent  instincts. 

THE    CORPORATION    SHOULD    BE    AN    INSTITUTION    OF    THE 

PEOPLE. 

What  government  is  to  mankind  politically  organized  I  have 
already  said  the  corporation,  as  an  intermediary  is  to  industry 
organized.  It  is  the  pride  of  free  institutions  that  they  have  dif- 
fused among  the  people  the  political  power  of  the  mass.  But  that 
is  not  the  secret  of  successful  free  government.  The  secret  of 
the  success  of  free  government  is,  that  by  opening  to  the  people 
the  door  to  power  they  have  awakened  a  universal  instinct  among 

230 


men,  and  have  created  the  capacity  to  successfully  exercise  that 
instinct;  so  ■much  so  that  it  can  be  safely  said  that  the  successful 
government  of  the  people,  by  the  people,  for  the  people,  is  not  the 
product  so  much  of  the  institution  itself  as  of  the  opportunity 
that  the  institution  opens  up.  And  what  can  be  done  with  the 
political  instincts  of  mankind  can  be  done  with  any  instinct  deeply 
imbedded  in  human  nature. 

It  is  for  the  reconstructed  corporation,  then,  as  an  effective, 
trustworthy  medium  through  which  to  work  out  one  of  the  deep- 
est and  most  insistent  of  human  instincts,  that  I  plead.  I  hold  it 
up,  it  is  true,  as  the  ultimate  fundamental  solution  of  the  merely 
economic  problem  of  competition.  But  it  is  not  an  economic 
cause  solely  that  I  plead.  It  is  a  human  cause.  In  the  day  when  the 
conscience  of  this  country  went  under  the  leadership  of  Lincoln 
the  supreme  human  inquiry  was,  shall  there  be  put  into  course  of 
ultimate  extinction  the  system  whereby  men  were  not  permitted 
to  eat  the  bread  earned  in  the  sweat  of  their  own  brows.  It  was 
a  mighty  moral  and  political  inquiry.  In  our  day  that  inquiry  is 
settled.  There  is  now  no  cloud  upon  the  brow,  no  shackle  upon 
the  arm  of  any  American  anywhere.  Before  the  law  they  all 
stand  equal.  But  the  same  great  movement  in  the  affairs  of  men 
that  has  carried  that  great  question  into  the  western  horizon  has 
brought  up  over  the  eastern  horizon  this  other  great  truth,  writ- 
ten almost  as  long  ago  and  by  the  same  great  hand,  that  it  is  not 
by  bread  alone  that  men  live.  And  the  question  I  put  to  you  now 
in  closing  is,  will  you  not,  in  declaring  in  favor  of  amendments 
of  the  Sherman  Act  that  will  put  that  act  in  accord  with  the 
economic  necessity  of  the  times,  declare  also  in  favor  of  such 
thoroughgoing  reconstruction  of  the  corporation  that  it — the 
medium  thrugh  which  almost  alone  is  wielded  the  world's  in- 
dustrial energies — will  be  put  in  accord  with  one  of  the  deepest 
human  instincts  of  all  times. 

THE  CHAIRMAN:  The  next  speaker  will  be  Mr.  Eugene 
E.  Prussing,  president  of  the  Citizens'  Association  of  Chicago 
who  will  speak  on.  "Corporate  Reforms." 

Mr.  Eugene  E.  Prussing. 

Mr.  Chairman — The  present  corporation  panic  is  greater  than 
any  disturbance  of  the  financial  world  since  the  bursting  of  the 
South  Sea  bubble  two  hundred  years  ago.  It  is  not  merely  a 
Wall  Street  affair ;  that  is  only  where  the  acutest  symptoms  man- 
ifest  themselves.     Its   pains   and  penalties   pervade   the   whole 

2.31 


P, 

hp  ¥ 


country,  and  its  effects  for  a  long  time  must  be  world-wide.  The 
condition  which  led  up  to  the  present  situation  have  been  well 
known  to  observing  men  for  a  long  time,  but  their  warnings 
have,  as  usual,  fallen  on  deaf  ears. 

From  the  day  of  Mr.  Bryan's  first  defeat  and  the  election 
of  Mr.  McKinley  in  1896  successive  debauches  of  promotion 
and  resulting  fits  of  indigestion  of  all  kinds  of  securities  have 
gradually  weakened  the  people's  resources  and  confidence.  The 
extraordinary  demands  of  the  Spanish,  Boer  and  Japanese  wars 
have  been  the  great  sprees,  adding  their  share  to  the  depletion 
of  strength,  and  finally  the  San  Francisco  disaster  and  the  insur- 
ance, railroad,  industrial,  bank  and  other  corporate  scandals, 
unearthed  and  uncovered  by  long  delayed  legal  investigations 
and  prosecutions,  have  caused  nausea,  revulsion,  fever  and  death. 
The  continued  selling  of  securities  is  the  evidence  of  this  condi- 
tion. 

The  $29,240,000  fine  was  comparable  in  its  effect  to  the  blast 
of  Gabriel's  trumpet. 

It  opened  all  the  graves,  apparently,  and  there  is  considerable 
wailing  and  gnashing  of  teeth.  How  many  thousand  millions 
of  paper  and  actual  values  have  disappeared  in  the  pit? 

The  separation  of  the  sheep  from  the  goats  by  the  people  now 
going  on  in  corporate  life,  and  the  best  ways  and  means  to  that 
end,  are  the  causes  which  have  brought  us  together  to-day. 
And,  as  was  well  said  by  a  great  general  after  a  great  defeat, 
we  must  now  begin  all  over  again. 

The  man  who  first  applied  the  corporate  form  to  commercial 
enterprise  and  the  man  who  invented  the  limited  liability  oi 
stockholders  therein  are  each  entitled  to  a  great  monument  as 
a  public  benefactor.  Some  commercial  palace,  some  temple  of 
industry  or  education,  ought  to  be  dedicated  to  their  memory, 
even  if  their  names  cannot  be  discovered. 

The  corporation  is  the  commercial  application  of  the  command 
to  "love  one  another,"  exemplified  in  combined  enterprise  for 
mutual  advantage,  and  has  aided  the  development  of  mankind 
almost  as  quickly  and  as  greatly  in  modern  times  as  the  discovery 
of  fire  and  how  to  preserve  it  did  in  the  prehistoric. 

CORPORATIONS  NOT  FREE  FROM  ABUSES. 

Of  course  there  have  been  great  abuses  of  these  inventions, 
just  as  there  are  dangers  in  fire  uncontrolled.     Naturally,  weak 

232 


and  wicked  men  have  used  these  splendid  instruments  for  undue 
advantage  and  the  oppression  of  their  fellows.  This  is  apt  to 
be  the  case  with  privilege — for  privilege  it  is  to  have  the  State 
put  the  breath  of  life  into  a  mere  paper  creation  of  the  mind 
and  endow  it  with  power  and  faculties  equal  to  the  combined 
capacity  of  a  regiment  of  men — yes,  in  many  cases,  of  an  army, 
with  practical  immortality  and,  above  all,  with  the  right  to  take 
tolls,  or  the  power  to  make  great  profits. 

We  are  met  because  the  abuse  of  these  great  charters  to 
"work  and  prey,"  as  they  have  been  called,  has  become  intoler- 
able, and  to  endeavor  to  find  a  peaceful  remedy  calculated  to 
remove  the  evils  and  to  avoid  those  and  kindred  ones  in  the 
future. 

The  modern  corporate  organization  has  become,  in  the  lan- 
guage of  the  law  against  monopolies,  "an  article  of  prime  neces- 
sity."  It  is,  therefore,  a  legitimate  subject  for  strict  legal  con- 
trol, or  police  regulation,  and  unless  we  accept  this  frankly 
and  guide  it  fairly  we  may  have  in  the  end  a  revolution,  whether 
by  law  or  otherwise,  which  will  give  us  Government  ownership 
of  all  industrial  enterprises. 

Now,  as  one  of  those  not  content  to  see  things  drift  or  forced 
into  the  latter  situation,  but  anxious  to  maintain  corporate 
rights  and  individual  liberty  in  proper  balance,  I  am  in  favor  of 
the  greatest  publicity  and  strictest  regulation  of  corporate  affairs 
compatible  with  practical  operation.  Only  in  this  way,  I  think, 
can  we  save  the  honest  usefulness  of  the  great  inventions  known 
as  "corporation"  and  "limited  liability,"  as  well  as  accomplish 
the  protection  of  the  innocent  investing  public,  which  is  largely 
and  helplessly  tied  to  them,  and  of  that  larger  public — the  body 
politic. 

PRIVATE  CORPORATIONS  AND  PUBLIC  SERVICE  CORPORATIONS 
ESSENTIALLY  ALIKE. 

There  is  little  difference,  and  that  only  in  degree,  between  the 
extreme  of  municipal  ownership  of  public  utilities,  and  all-em- 
bracing industrial  socialism.  Socialists  favor  municipal  owner- 
ship because  it  is  in  the  line  of  universal  public  ownership.  We 
have  just  escaped  the  recent  tide  of  municipal  ownership,  if  we 
have  escaped  it. 

There  is  no  difference  in  principle  in  the  complaints  against 
so-called  private  corporations,  their  owners  and  managers,  and 

233 


the  complaints  against  public  utility  corporations,  their  owners 
and  mjanagers.  The  substance  of  all  is  "you  are  abusing  your 
'high  privileges  to  our  detriment.  We,  the  people,  gave  you 
these  privileges  for  our  benefit  as  well  as  yours."  This,  gentle- 
men, is  the  "handwriting  on  the  wall."  The  question  is.  "Shall 
we  heed  it?" 

In  an  address  to  the  Merchants'  Club  of  Chicago  in  April, 
1906,  while  the  insurance  investigations  were  still  on,  President 
Eliot,  of  Harvard  University,  speaking  on  the  "Ethics  of  Cor- 
porate Management,"  said:  "That  this  Merchants'  Club  should 
ask  one  whose  occupations  have  been  teaching  science  for  fifteen 
years,  and  educational  administration  for  thirty-seven  years, 
to  address  this  club  on  the  'Ethics  of  Corporation  Management' 
is  an  interesting  manifestation  of  the  prodigious  change  which 
has  come  about  in  the  course  of  four  or  five  centuries — 
gradually  until  recent  times,  but  rapidly  during  the  last  half 
century — in  regard  to  the  responsibility  of  different  classes  of 
men  for,  the  maintenance  and  diffusion  of  sound  ethical  stand- 
ards." 

The  questions  considered  in  that  very  able  address  lie  at  the 
foundation  of  our  considerations  here.  They  are  indeed  funda- 
mental and,  like  every  fundamental  question  of  policy  or  method, 
are  moral  questions — ethical  questions.  And  so,  unless  we  call 
in  the  assistance  of  moral  philosophy  in  this  seemingly  practical 
and  legal  situation,  we  shall  lose  the  benefit  of  those  guiding 
stars  which  should  ever  lead  us — though  we  know  we  can  never 
quite  reach  theml. 

Other  countries  have  had  similar  experiences  with  corpora- 
tions and  have  solved,  in  their  own  way,  the  same  problems. 
Every  student  of  Anglo-Saxon  jurisprudence  looks  at  once  in 
difficulties  of  this  kind,  for  precedents,  knowing  their  force  as 
arguments,  their  value  as  examples,  their  wisdom  as  guides. 

Soon  after  this  address  the  present  speaker  sent  to  the  Chicago 
Legal  News  some  suggestions  upon  the  two  main  difficulties  in 
the  unsatisfactory  conditions  noted  by  President  Eliot  in  modern 
corporate  affairs,  namely,  the  twin  evils — overcapitalization  and 
extravagant  salaries — the  latter  being  simply  one  of  the  ele- 
ments in  the  broader  subject  of  management. 

These  suggestions  showed  that  remedies  might  readily  be 
found  for  these  matters — remedies  which  in  England  and  oh. the 
Continent  of  Europe  had  proved  efficient. 

Before  touching  upon  the  details,  I  wish  to  give  the  principle 

22A 


underlying  them,  namely:  Corporation  as  between  its  managers 
on  the  one  hand  and  its  stockholders  on  the  other  is  simply  a 
trust  in  the  good  legal  sense.  The  former  are  the  trustees  and 
the  latter  are  the  beneficiaries.  As  between  the  corporation  and 
its  stockholders  on  the  one  hand  and  the  public  on  the  other, 
the  relation  is  the  same,  for  the  grant  of  the  great  privileges 
of  incorporation  and  limited  liability,  to  say  nothing  of  the  right 
to  take  tolls,  by  the  public  to  individuals,  is  on  the  implied 
condition  of  the  good  use  thereof  for  the  public  benefit  as  well 
as  that  of  the  stockholders. 

Now  a  trust  has  always  been  a  favored  child  and  most  pre- 
cious object  of  the  jurisdiction  of  courts  of  equity  or  conscience, 
and  in  many  instances  the  arms  of  the  Court  have  reached  out 
to  protect  the  innocent  and  have  seized  upon  the  dishonest  or 
incompetent  corporate  managers  and  their  tool,  the  corporation, 
to  compel  accounting,  correction,  liquidation  or  dissolution. 

It  is,  therefore,  not  an  innovation  of  much  magnitude,  nor  is 
it  adopting  a  new  and  radical  principle  or  course  when  it  is 
proposed  that  the  jurisdiction  of  the  Courts  with  respect  to 
corporations  be  broadened  so  as  to  include  the  birth,  capitaliza- 
tion, development  and  ordinary  management  of  corporations, 
as  well  as  their  extraordinary  affairs  of  sickness  and  death. 

•  In  the  case  of  trusts  involving  the  care  of  estates  this  plan  has 
been  evolved  and  expanded  under  the  stimulus  of  manifest  and 
growing  necessity,  so  that  now  the  widow,  the  orphan,  the 
creditor  and  others,  their  beneficiaries,  are  all  protected  from 
the  beginning  to  the  end  by  the  Court,  and  the  trustees  are  ap- 
pointed, controlled,  punished,  removed  and  compelled  to  ac- 
count fully  and  regularly  whenever  sound  policy  or  a  complain- 
ant justly  requires  it.  Their  affairs  are  regulated  by  indepen- 
dent officials  of  judicial  character  upon  principles  of  equity  and 
the  common  law. 

The  same  growing  necessity  confronts  us  respecting  corpora- 
tions, and  as  a  prudent  people,  bred  in  the  faith  of  the  English 
and  American  common  law — our  noble  jeritage — we  naturally 
look  to  it  for  guidance  and  help. 

The  suggestions  I  am  about  to  make  were  deliberately  ac- 
cepted by  the  great  advocate  of  the  peopleization  of  corpora- 
tions, Judge  Grosscup,  in  his  speech  at  Kansas  City  last  Winter. 
They  were  unconsciously  confirmed  in  the  recent  address  of  Mr. 
Robert  Mather,  president  of  the  Rock  Island  Company,  before 
the  Chicago  Commercial  Association,  wherein  he  declared  that 

235 


the  railroads  would  now  cheerfully  submit  to  a  plan  of  Federal 
regulation  of  rates  rather  than  longer  continue  in  the  chaotic 
condition  resulting  from  their  own  competition,  and  competition 
among  regulating  States,  inspired  by  local  interests,  without 
sufficient  regard  to  the  rights  of  the  corporation  or  the  citizens 
of  other  commonwealths. 

The  principles  involved  in  these  suggestions  have  been 
adopted  in  part  in  those  laws  of  recent  enactment  for  the  con- 
trol in  capitalization  and  management  of  public  utility  corpora- 
tions in  New  York,  Wisconsin,  Iowa  and  elsewhere,  following 
the  older  example  of  Massachusetts — so  that,  as  I  say,  they  are 
suggestions  along  familiar  lines  following  ancient  methods  "well 
understanded  of  the  people.'' 

AS  TO  THE  CREATION  OF  CORPORATIONS. 

Suppose  it  should  be  ordained  as  to  the  creation  of  corpora- 
tions as  follows :  In  case  of  every  corporate  organization  pro- 
posed a  petition  shall  be  filed  by  the  promoters,  not  with  the 
Secretary  of  State,  but  in  a  local  court  of  ample  jurisdiction,  as 
we  now  do  in  probate  matters,  setting  forth  the  usual  items  of 
primary  importance,  such  as  the  name  of  the  proposed  corpora- 
tion, its  capital  stock,  the  number  and  amount  of  its  shares,  its 
length  of  life,  the  number  of  its  directors,  and  its  purposes,  to- 
gether with  a  statement  of  when,  how  and  wherewith  the  capital 
is  to  be  furnished,  whether  in  money,  property,  labor,  goodwill 
or  what  not,  and  praying  for  a  rule  on  the  State's  attorney  to 
attend  and  investigate  the  matter. 

SPECIAL  PRIVILEGES   OR  PREFERENCES   FOR  THE  BENEFIT  OF 

PARTICULAR  STOCKHOLDERS  MUST  BE  SPECIFIED  IN 

THE  PETITION  NAMING  THE  BENEFICIARY. 

In  case  the  capital  stock  or  any  part  therof  shall  be  con- 
tributed otherwise  than  in  money,  or  in  case  existing  or  future 
buildings  or  other  property  are  to  be  acquired  by  the  company, 
then  these  and  the  names  of  the  vendors,  the  purchase  price, 
payable  in  shares  or  other  value,  are  to  be  specified. 

In  a  separate  specification  shall  be  stated  any  sum  or  con- 
sideration which  the  corporation  or  any  one  else  is  required  to 
pay  or  furnish  for  the  promotion  or  other  services  in  prepara- 
tion of  or  the  formation  of  the  corporation. 

236 


Every  agreement  upon  the  foregoing-  subjects  which  is  not  so 
specified  shall  he  void  as  to  the  corporation. 

Similar  details  respecting  the  purposes  of  the  corporation  shall 
be  given  so  that  the  uses  to  which  it  may  be  put  or  it  is  in- 
tended to  put  it  may  be  carefully  investigated  by  the  party  miost 
interested — the  State. 

When  the  State's  attorney  has  been  notified,  it  shall  be  his 
duty  to  appear  for  the  people,  as  in  other  cases,  and  a  hearing 
shall  speedily  be  had  in  which  evidence  shall  be  submitted  in 
support  of  the  petition,  subject  to  examination  and  cross-ex- 
amination and  rebuttal,  and  a  decree  or  judgment  shall  be 
passed  as  in  equity  cases,  specifying  in  sufficient  detail  the  result 
of  the  investigation,  and  either  disallowing  or  allowing  the  in- 
corporation and  settling  the  details,  especially  those  of  the 
capitalization  and  its  method,  and  the  definition  and  intent  of 
the  corporate  purposes,  to  the  end  that  stock  watering  and 
stock  jobbing  may  be  minimized,  if  not  wholly  prevented,'  and 
the  public  may  not  be  the  victim  of  false  pretenses  or  vicious 
schemes  under  claims  of  corporate  privileges  couched  in  gen- 
eral phrases,  while  the  corporation  will  be  protected  against  pos- 
sible blackmailers  by  injunction. 

In  the  case  of  additions  to  or  reductions  of  the  capital  stock, 
or  other  changes  in  the  constitution  of  the  company,  similar 
proceedings  shall  be  had,  and  bond  and  other  large  issues  of 
obligations  shall  be  likewise  adjudged  and  authorized  in  ad- 
vance. Even  compositions  with  creditors  or  compulsory  re- 
ductions of  stock  to  avoid  bankruptcy  may  be  instituted  by  any 
suffijciently  large  interest.  Thus  the  corporation  will  be  fos- 
tered, guarded,  enlarged  and  controlled  in  leading  an  honest  life, 
publicly  beneficial,  as  the  law  always  intended  it  should.  Proper 
provision  should  be  made  for  carrying  out  the  decree  and  to 
punish  disobedience  or  fraud,  as  cases  of  contempt  of  Court,  by 
the  imprisonment  of  the  officials — not  by  fine. 

The  usual  license  fees  are  to  be  paid  by  the  corporation  to  the 
State,  and  the  charter  shall  consist  of  a  certified  copy  of  the 
petition  and  decree,  duplicates  of  which  shall  be  filed  with  the 
Secretary  of  State. 

It  needs  no  great  acumen  to  perceive  the  advantages  to  the 
public,  whether  investors  or  not,  and  to  honest  promoters  end 
corporations  in  thus  having  at  the  beginning  a  judicial  certificate 
of  good  moral  character  and  a  sound  constitution  to  offer  the 
investing  public,  while  the  general  effect  upon  business  morals, 

2.37 


by  removing  both  the  temptation  to  water  stocks  and  the  cor- 
rupting example  of  large  paper  profits,  must  be  wholly  good. 
Again,  the  possibility  of  organizing  trusts  or  piratical  schemes 
is  absolutely  prevented,  because  not  only  the  declared  but  the 
real  purpose  of  the  corporation  is  subject  to  scrutiny  and  ad- 
judication under  this  plan  at  the  time  when  it  ought  to  be — 
before  the  mischief  is  done,  before  the  supposed  right  to  do 
wrong  becomjes  vested.  Illustrations  of  this  will  readily  occur 
to  all.  The  familiar  cases  of  the  reorganization  of  the  Sugar 
Company  and  the  Standard  Oil  Company  after  their  trust  agree- 
ments were  condemned  by  the  Courts  at  once  suggest  them- 
selves. An  application  to  incorporate  them  made  and  adjudi- 
cated as  here  suggested  would  have  ended  them. 

The  details  of  the  plan  I  do  not  enlarge  upon.  They  may  be 
as  varied  and  closely  guarded  as  human  ingenuity  may  devise, 
but  they  present  no  serious  difficulty.  It  is  the  illustration  of 
the  principle  of  State  superintendence  of  the  birth,  constitutional 
endowment  and  growth  of  its  great  offspring  that  we  are  now 
concerned  with. 

We  come  now  to  the  second  subject — 

CORPORATION  MANAGEMENT 

Laying  aside  the  ordinary  dangers  of  direct  theft  and  mistakes 
of  judgment,  wre  are  concerned  because  officers  and  directors 
of  corporations  are  disposed  to  take  advantage  of  their  insuffi- 
ciently controlled  powers  over  large  funds  and  properties  be- 
longing to  others,  and  to  use  them  for  their  personal  advantage 
in  the  form  of  large  salaries  and  expense  accounts,  speculation, 
nepotism,  dishonest  contracts  and  otherwise,  to  the  detriment  of 
their  stockholders  and  to  the  demoralization  of  the  public;  and, 
also,  because  they  are  disposed  to  defraud  stockholders  by  with- 
holding or  declaring  dividends  without  notice,  or  by  paying  them 
from  borrowed  money  without  earnings;  because  they  are  dis- 
posed to  abuse  the  public  by  stock  watering,  by  excesses  of 
power,  by  unjust  charges,  illegal  discrimination  in  services,  or 
by  rebates — in  short,  by  the  unjust  levying  of  tolls  and  the 
making  of  unfair  profits. 

The  underlying  fault  in  our  corporate  constitutions,  to  my 
mind,  is  expressed  in  the  single  sentence,  which  forms  the 
foundation  of  our  corporate  law,  namely:  "The  corporate  pow- 
ers shall  be  exercised  by  a  board  of  directors  or  mjanagers." 

238 


This  sentence  has  been  held  by  the  courts  to  mean  all  the 
powers,  except  a  few  expressly  reserved  by  law  to  the  stock- 
holders, such  as  electing  directors  and  acts  in  respect  to  the 
increase  or  decrease  of  capital  stock,  and  similar  fundamental 
things. 

I  know  that  in  some  States  there  are  numerous  attempts  at 
the  limitation  of  directors'  powers,  but  I  am  speaking  now 
generally  and  the  words  I  have  quoted  are  the  express  pro- 
vision of  the  statute  in  this  State,  and  in  many  others  simply 
declaratory  of  the  common  law. 

We  all  know  that  unlimited  power  produces  abuses;  we  all 
know  that  a  Government  of  limited  powers  is  a  necessary  thing ; 
that  representatives  long  uncontrolled  or  insufficiently  con- 
trolled, tend  to  vice  and  corruption,  and  that  governments  to 
be  successful  and  long-lived,  must  have  in  them  other  checks 
and  balances  than  the  possibility  of  the  loss  of  an  election  for 
the  proper  control  of  their  officials.  We  know  that  periodical 
revision  of  constitutions  and  strict  control  of  officers  by  legis- 
lation and  the  people  are  essential ;  that  eternal  vigilance  is  the 
price  of  liberty  and  that  reserved  powers  are  the.  safety  of  the 
people.  Precisely  the  same  is  true  of  corporations,  their  officers 
and  stockholders. 

Corporate  management  should  not  be  entrusted  to  a  single 
body  of  directors  or  officers.  Like  our  State  and  Federal  gov- 
ernments, it  should  be  divided  into  three  parts,  each  actively 
exercising  its  functions  to  accomplish  the  desired  end,  long  life 
.and  dividends.  The  stockholders,  directors  and  officers,  each 
of  these  groups,  or  parts,  should  have  a  substantial  but  separate 
and  independent  set  of  duties  and  powers,  and  should  be  subject 
to  judicial  control,  although  the  latter  should  not  be  exercised 
until  certain  preliminary  efforts  of  the  others  have  been  ex- 
hausted or  refused. 

Instead  of  autocratic  government  of  corporations  we  should 
substitute  constitutional  government — for  one  man  power,  sub- 
stitute a  government  of  logically  divided  parts  and  proper 
checks  and  balances.  Instead  of  the  present  oligarchy  known 
as  a  board  of  directors  or  the  Czarlike  domination  of  a  single 
individual,  require  the  co-operation  of  the  officers,  directors  and 
stockholders  in  the  chief  corporate  acts  and  give  to  each  de- 
partment of  such  government  separately  only  the  powers  and 
authority  properly  and  necessarily  required  for  it. 

In  respect  to  the  management,  the  principle  underlying  the 

239 


division  of  powers  should  be  that  the  stockholders  should  legis- 
late for  the  company  while  the  directors  should  supervise  and 
determine,  and  the  officers  execute  and  guard  its  business. 

In  respect  to  the  profits,  the  stockholders  alone  should  control 
their  application  and  the  declaration  of  dividends. 

SOME  SOUND  RULES  OF  ADMINISTRATION. 

To  go  a  little  into  details' on  each  of  these  subjects,  I  take  the 
case  under  my  observation  of  a  manufacturing  corporation  in 
which  these  principles  have  been  applied  with  great  success : 

The  by-laws  of  that  company  provide,  among  other  things : 

i.  That  certain  public  notices  to  the  stockholders  shall  be 
regularly  given  in  two  specified  newspapers  in  America  and 
one  in  Germany,  where  many  of  the  stockholders  reside. 

2. .  The  board  of  directors  shall  direct  and  supervise  the  man- 
agement of  the  company  in  all  its  branches..  For  that  pur- 
pose it  may  at  any  time  require  any  officer  of  the  corporation 
to  make  to  it  a  report  touching  the  business  of  his  office.  The 
directors  may  inspect  the  books  and  papers,  examine  the  money, 
valuables  and  merchandise  of  the  company,  and  do  and  require 
anything  which  they  may  deem  proper  for  the  business  of  the 
corporation. 

A  special  examination  of  the  check  books,  cash,  moneys, 
vouchers  and  valuables  must  take  place  at  least  once  each  year. 
The  board  of  directors  is  at  liberty  to  entrust,  temporarily,  one 
or  more  of  its  members  with  the  supervision  and  decision  re- 
specting single  business  transactions  or  branches  of  business. 

The  board  of  directors  has  the  power  to  appoint,  suspend  or 
dismiss  for  cause  any  officer,  agent  or  employe  of  the  company, 
whether,  appointed  by  the  board  of  directors  or  otherwise,  and 
may  fill  any  vacancy  in  any  office  of  the  company. 

The  members  of  the  board  shall  be  entitled  to  the  repayment 
of  their  expenses  incurred  in  the  performance  of  their  duties, 
and  shall  each  receive  a  salary  of  $1,000,  in  addition  to  the 
percentage  of  profits  hereinafter  specified. 

Officers  are  not  permitted  to  be  members  of  the  board  of 
directors,  which  chooses  its  own  chairman. 

3.  Respecting  the  minor  officers,  the  usual  provisions  are 
made. 

The  president  shall  be  the  general  manager  of  the  business 
of  the  company,  and  as  such  shall  have  charge  of  its  property 
and  affairs,  under  the  direction  of  the  board. 

240 


He  must,  however,  have  the  special  authority  of  the  board  in 
the  following  instances : 

1.  For  the  acquirement,  conveyance  and  mortgaging  of  real 
estate. 

2.  For  the  acquirement,  assignment,  pledge  or  satisfaction 
of  mortgages. 

3.  For  borrowing  money  in  excess  of  ordinary  bank  credits. 

4.  For  determining  the  principles  regarding  the  plans  of 
manufacturing  and  management,  for  the  change  of  these  plans, 
for  all  essential  building  plans  and  building  contracts. 

5.  For  the  acquirement  of  machinery,  tools  and  utensils,  if 
the  ambunt  in  each  case  is  more  than  $5,000 ;  likewise  for  fixing 
the  principles  to  be  observed  in  sales  of  merchandise,  and  the 
regulation  of  the  conditions  of  sale. 

6.  For  contracts  containing  obligations  of  the  company  ex- 
tending over  more  than  one  year. 

7.  For  appointing  agents  or  employes,  if  the  annual  com- 
pensation amounts  to  more  than  $1,500,  or  the  notice  of  dis- 
charge agreed  upon  is  more  than  three  months. 

8.  To  fix  the  banks  of  deposit  for  the  funds  of  the  company. 

It  is  a  principle  of  the  law  in  pursuance  of  which  these  by- 
laws were  framed  that  officers  and  directors  of  corporations  are 
jointly  and  severally  liable,  civilly  to  the  corporation  and  others 
who  may  be  injured,  as  well  as  criminally  in  case  of  a  disregard 
or  violation  of  its  provisions ;  and  all  such  provisions,  of  which 
these  by-laws  are  merely  a  copy,  are  mandatory. 

This  law  has  developed  a  high  and  keen  sense  of  moral  and 
legal  responsibility,  and  its  prompt  and  vigorous  enforcement  in 
a  few  cases  has  resulted  most  satisfactorily  to  the  public. 

We  know  from  our  own  experience  under  the  National  and 
State  Banking  Laws  the  value  of  such  provisions  and  their 
enforcement.  We  need  but  to  expand  the  policy  of  these  laws 
by  applying  their  principle  with  some  modifications  to  all  cor- 
porations to  practically  make  an  end  of  corporate  fraud  and 
mismanagement,  certainly  to  prevent  the  speedy  repetition  of 
prevailing  conditions. 

BY-LAWS. 

It  is  customary  with  us  to  limit  the  power  ©f  stockholders  to 
the  election  of  directors  and  similar  fundamental  acts.  They 
should  also  have  and  exercise  the  power  of  making  by-laws, 

241 


as  they  have  in  some  of  our  States.  By-laws  should  contain 
specific  provisions,  not  general  phrases,  and  the  violation  or 
neglect  of  these  provisions  by  officers  or  directors  should! 
render  subject  to  liability — in  damages  and  punishment  crimi- 
nally, all  who  participate  in  or  tolerate  the  wrongful  acts.  The 
underlying  provisions  of  proper  compensation  to  officers  and 
directors  is  the  basis  for  these  liabilities. 

Another  element  to  be  considered  is  that  of  dual  management. 
In  Germany  and  England,  the  chief  executive  of  the  corporation 
usually  consists  of  two  persons  of  equal  power,  whose  joint  act 
is  required  to  bind  the  corporation  in  important  matters,  while 
they  may  act  singly  in  minor  matters  specificed  in  the  by-laws. 
This  check  is  the  result  of  long  experience  and  it  makes  for  pru- 
dence and  honesty.  It  is  true  that  such  dual  representatives  are 
usually  not  of  equal  ability,  and  that  one  of  them  more  or  less 
dominates  the  other.  Nevertheless  their  inherent  legal  powers 
are  equal.  Each  has  the  right  to  call  upon  and  report  to  the 
stockholders  or  directors,  or  to  appeal  to  the  courts,  and  the 
result  is  most  wholesome  conservatism. 

Independent  auditors  are  to  be  elected  annually  by  the  stock- 
holders, and  at  the  end  of  the  fiscal  year  reports  are  to  be  sub- 
mitted by  officers,  directors  and  auditors  to  the  annual  meeting 
of  the  stockholders  with  such  recommendations  as  to  the  divi- 
sion of  earnings,  if  any,  as  they  may  deem  best. 

SALARIES  AND  DIVIDENDS. 

The  by-laws  from  which  I  have  quoted  provide  that  officers 
shall  receive  moderate,  good  living  salaries;  that  each  director 
shall  receive  a  salary  of  $1,000  a  year;  that  then  certain  fixed 
percentages  shall  be  deducted  and  written  off  for  depreciation 
or  renewals  of  plant,  machinery,  etc.,  whereupon  the  stock- 
holders shall  receive  a  minimum  or  first  dividend  of  four  per 
cent,  per  annum  upon  their  capital.  Out  of  the  remainder,  the 
directors  and  officers  shall  each  receive  a  moderate  percentage, 
usually  ten  per  cent,  to  each  class.  This  they  divide  among 
themselves,  the  directors,  usually,  in  equal  parts,  but  the  of- 
ficers in  varying  proportion  according  to  the  importance  of 
their  services. 

The  surplus  profits  then  remaining  are  subject  to  the  vote  of 
the  stockholders  for  additional  dividends  or  other  purposes, 
such  as  increase  of  working  capital,  new  construction  or  busi- 

242 


ness  changes.  Provision  is  made  for  ad  interim  dividends  until 
t lie  following  annual  meeting. 

These  are  some  of  the  results  of  English,  French  and 
especially  German  experience. 

The  latter  country,  after  the  great  "Promoters'  Swindle"  panic 
in  the  middle  seventies,  fixed  upon  fraudulent  promoters,  officers 
and  directors  of  corporations  and  their  aiders  and  abettors 
posing  as  vendors,  dummy  directors,  underwriters  and  bankers, 
severe  civil  and  criminal  liabilities,  the  latter  especially  of  the 
most  distasteful  kind — namely  imprisonment.  These  were  so 
uniformly  and  vigorously  enforced  by  the  courts  that  for  nearly 
thirty  years  Germany  was  free  from  corporation  scandles  of  any 
magnitude  and  industrial  securities  became  the  favorite  invest- 
ments of  the  savings  of  the  people.  In  1901  a  short  check  was 
caused  to  Germany's  industrial  development  by  the  temporary 
panic  precipitated  by  the  failure  of  the  malt  drying  companies, 
but  the  prompt  flight,  suicide  or  imprisonment  of  all  concerned 
in  that  swindle  restored  public  confidence  and  Germlany  soon 
resumed  its  former  course.  It  is  not  free  from  corporate  mis- 
management, but  the  disease  is  rare,  and  its  manifestations  few. 

HOW  TO  MAKE  THE  CHANGES  DESIRED  IN  THE  LAW  OF  COR- 
PORATIONS. 

In  every  State  of  the  Union  changes  are  being  made  in  cor- 
poration laws  along  the  lines  suggested  here.  Conventions  of 
Attorneys-General  and  other  State  officers  are  being  held  to 
consider  ways  of  curbing  and  curing  corporate  abuses.  We  are 
hereto-day  for  a  similar  purpose. 

The  American  Bar  Association  has  for  many  years  been  at 
work  to  bring  about  uniformity  of  the  laws  of  the  States  on 
various  subjects.  It  has  prepared  codes  on  bills  and  notes, 
divorce  and  similar  matters  and  submitted  them  to  the  various 
legislatures  through  local  committees  or  State  Bar  Associa- 
tions and  in  a  number  of  instances  its  codes  have  been  enacted 
into  laws.  The  plan  is  sensible,  logical  and  slow  enough  to  meet 
with  the  approval  of  conservative  minds.  An  attempt  at  Federal 
control  of  all  or  most  corporations  would  be  so  great  a  step 
in  the  direction  of  centralization  of  all  government  and  so 
serious  an  inroad  upon  local  and  State  Rights  as  well  as  so  cum- 
bersome and  dangerous  in  its  delays  as  to  arouse  universal 
opposition,  while  individual  State  legislation,  properly  guided, 

243 


standardized  and  harmonized,  can  be  obtained  by  a  campaign 
of  education  and  friendly  co-operation.  The  same  laws  will 
not  fit  all  the  States.  There  are  differences  so  strong  and 
peculiar  that  the  laws  on  a  subject  like  this  must  vary  in  dif- 
ferent States.  But  the  basic  difficulty  is  universal,  as  is  also  the 
remedy.  The  time  is  ripe  throughout  this  great  valley;  the 
struggle  is  on.  Senator  La  Follette,  Governor  Deneen, 
Governor  Johnson  and  Governor  Folk  are  standard-bearers 
in  the  cause.  In  the  East,  Governor  Hughes  has  packed  more 
good  work  into  eight  months'  time  than  any  one  thought  pos- 
sible, and  has  crushed  all  opposition.  Last  and  foremost  of  all 
is  Theodore  Roosevelt,  who  has  another  year  and  a  half  in 
which  not  to  compete,  but  to  shape  and  build  up  the  structure 
for  which  he  has  cleared  away  the  rubbish  and  laid  solid  founda- 
tions on  the  rocks  of  truth  and  right,  and  reared  the  first  story 
in  the  policy  of  a  square  deal  and  no  favorites. 

Nearly  fifty  years  ago,  on  an  occasion  not  much  more  serious 
than  this,  Mr.  Lincoln  said: 

"If  we  could  first  know  where  we  are  and  whither  we  are 
tending  we  could  better  judge  what  to  do  and  how  to  do  it. 
We  are  now  far  into  the  fifth  year  since  a  policy  was  initiated 
with  the  avowed  object  and  confident  promise  of  putting  an  end 
to  slavery  agitation.  Under  the  operation  of  that  policy,  that 
agitation  has  not  only  not  ceased,  but  has  constantly  aug- 
mented. In  my  opinion,  it  will  not  cease  until  a  crisis  shall 
have  been  reached  and  passed.  'A  house  divided  against  itself 
cannot  stand.'  I  believe  this  Government  cannot  endure  half 
slave  and  half  free.  I  do  not  expect  this  Union  to  be  dissolved. 
I  do  not  expect  the  house  to  fall,  but  I  do  expect  it  to  cease  to 
be  divided." 

The  crisis  which  confronts  us  to-day  is  like  that  which  Mr. 
Lincoln  faced.  Brought  about,  not  by  the  fault  of  individuals 
alone,  but  stimulated  and  fostered  by  our  unexampled  growth 
and  prosperity  as  well  as  by  our  unexampled  tolerance  of  wrong 
and  wrongdoers,  we — the  people — are  to-day  seeing  the  growth 
of  what  we  sowed. 

What  shall  the  harvest  be — all  tares  and  no  wheat ;  all  panic 
and  loss  and  no  gain  or  reform?  That  is  the  question — and  the 
time  for  answer  and  action  is  now. 

It  is  our  common  weal  or  woe.  Our  country  is  on  trial. 
Our  honor  is  in  question.  Harangue,  invective,  iconoclasm  will 
not  cleanse  our  escutcheon.     The  time  has  come  for  us  to  sink 

244 


individual  interests  and  work  as  we  may  never  again  have  the 
chance  to  work,  for  the  right  which  finally  must  and  will  prevail. 

Let  us  take  up  this  great  subject  of  corporate  reform  method- 
ically, patiently,  industriously  through  a  representative  com- 
mittee. Let  us  try  to  formulate  and  enact  into  universal  laws  a 
few  principles  and  methods  founded  on  mutual  rights  warranted 
by  experience  and  approved  by  justice,  which  will  meet  the 
present  defects,  until  n^en  shall  say  of  our  work  as  said  the 
Apostle :  "We  know  that  the  law  is  good,  if  a  man  use  it  law- 
fully." 

Gentlemen,  as  of  old,  "these  are  the  times  that  try  men's  souls. 
The  summer  soldier  and  the  sunshine  patriot  will,  in  this  crisis, 
shrink  from  the  service  of  his  country,  but  he  that  stands  it  now 
deserves  the  love  and  thanks  of  man  and  woman." 

THE  CHAIRMAN :  The  Conference  will  now  be  addressed 
on  "Labor  and  the  Trusts"  by  Mr.  Samuel  Gompers,  President 
of  the  American  Federation  of  Labor,  who  needs  no  introduc- 
tion to  this  audience. 

Mr.  Samuel  Gompers. 

Mr.  Chairman — The  organization  which  I  have  the  honor  to 
represent  is  sometimes  called  by  those  who  are  not  in  sympathy 
with  its  aims  a  trust. 

It  is  claimed  that  by  belonging  to  a  union  a  working- 
man  surrenders  his  inalienable  rights  to  individual  action.  No 
one  would  more  gladly  plead  for  the  sovereignty  and  the  in- 
dividual action  of  every  workman  than  would  I,  were  it  possible, 
but  with  the  division  of  labor  the  worker  loses  his  individuality 
the  moment  he  enters  a  modern  industrial  plant,  and  becomes 
indeed  but  a  cog  in  the  whole  wheel.  I  ask  how  any  individual 
workman  could  hope  to  assert  a  right  in  a  modern  industrial 
plant  or  to  seek  redress  for  a  wrong.  And  I  may  say  to  my 
friends  that  in  my  judgment  there  is  a  debt  of  obligation 
which  all  our  people  owe  to  the  much  abused  organizations  of 
labor  and  the  combinations  of  capital.  We  have  seen  within  this 
past  two  or  three  months  what  has  been  termed  a  shrinkage  of 
values  unparalleled  in  the  history  of  the  world.  I  am  holding 
in  my  hand  a  paper  of  last  Sunday,  and  I  find  there  the  assertion 
demonstrated  by  figures,  past  and  present,  that  there  has  been 
a  shrinkage  of  more  than  three  billion  dollars  in  value.  Of 
course,  as  a  rule,  the  statement  is  made  that  they  are   real 

245 


values.  As  a  matter  of  fact  they  are  nothing  more  or  less  than 
inflated  values — watered  stocks.  I  ask  you,  my  friends,  of  the 
three  billion  dollars  supposed  to  have  been  shrunk  in  the  values 
of  our  country,  where  has  been  the  real  shrinkage  of  anything 
tangible.  The  princes  of  finance,  with  their  tricks  and  machina- 
tions— many  of  them  have  been  caught  in  their  own  maelstrom, 
which  they  themselves  have  created.  And,  as  is  always  the  case 
at  such  times,  the  large  fish  will  swallow  up  the  smaller.  If 
the  employers  of  labor  in  their  combinations  will  but  take  the 
intelligent,  the  comprehensive  and  the  sound  economic  stand 
which  labor  has  declared  for  itself,  we  shall  avoid  a  crisis  in  our 
own  time.  Never  in  the  history  of  the  world  has  there  been 
such  a  financial  shrinkage  of  values  unless  it  has  been  ac- 
companied by  an  industrial  crisis  that  has  had  misery,  poverty 
and  degradation  in  its  wake.  It  may  be  as  well  understood 
now  as  at  any  time,  and  I  doubt  if  there  is  any  other  place  in 
which  it  is  more  appropriate  to  say  it  than  it  is  to  say  it  now, 
in  view  of  the  conditions  as  we  see  them  at  this  moment,  that 
the  American  workingmen  are  as  intelligent  to-day,  and  perhaps 
will  be  more  intelligent  to-morrow  than  they  were  yesterday  or 
the  "day  before.  They  are  just  as  willing  and  capable  of  work- 
ing, and  will  be  to-morrow  as  they  are  to-day  and  were  yester- 
day; that  the  soil  of  our  country  is  just  as  fertile,  and  that  there  is 
no  absolute  economic  necessity  for  the  attempt  to  force  the 
burden  of  this  artificial  financial  shrinkage  upon  the  shoulders 
of  the  working  people  of  our  country.  And  it  may  as  well  be 
understood  now  that  the  working  men  have  said  it — and  if  I 
know  anything  of  them  at  all  I  am  sure  that  they  are  determined 
to  live  up  to  it — that  the  standard,  the  American  standard,  of 
life  shall  not  be  taken  away  from  them. 

THE  IMPORTANCE  OF  THE  TRUST. 

There  is  perhaps  no  issue  before  the  people  to-day  in  which 
greater  general  interest  is  felt  than  that  of  trusts,  their  develop- 
ment, their  policy,  their  effect  upon  civic  and  individual  life. 
Few  issues  are  more  completely  befogged  to  the  average  mind, 
and.  this  is  not  necessarily  the  fault  of  the  average  mind.  Many 
forces  are  interested  in  befogging  the  issue.  Then;  too,  the 
growth  of  trusts  has  been  so  marvelously  rapid  and  their  in- 
fluence is  felt  in  so  many  directions  that  it  is  only  natural  that  the 
phenemenon  of  trust  development  should  be  viewed  with  amaze- 

246 


ment  and  a  strong"  sense  of  protest  by  those  whose  chief  knowl- 
edge of  its  existence  is  gained  in  the  pains  and  penalties  of  an 
economic  readjustment  greater  than  civilization  has  ever  known 
before. 

To  say  that  there  are  "good  trusts  and  bad  trusts"  is  to  state 
a  certain  bromidic  truism.  But  the  statement  needs  a  broad 
foundation  and  some  explanation  in  order  to  take  its  place  in 
the  educational  vocabulary  of  the  new  era. 

Instead  of  discussing  the  various  kinds  of  trusts,  good  and  bad, 
let  lis  understand  clearly  that  the  trust  is  the  logical  develop- 
ment of  the  present  economic  era. 

With  the  invention  of  good  artificial  light,  of  machinery  and 
power r  and  their  application  to  industry,  came  the  modern  in- 
dustrial plants.  With  their  advent  and  development  the  day 
of  individual  workman  and  individual  employer  passed,  never 
to  return. 

So  new  is  the  trust  idea  that  the  term  is  scarcely  capable  of 
accurate  definition.  Every  man  has  a  different  definition  of  a 
trust,  according  to  his  point  of  view  or  his  own  interests. 

MANY  KINDS  OF  TRUSTS. 

The  perception  of  what  a  trust  really  is  becomes  the  more 
confused,  because  the  great  aggregations  of  capital,  loosely 
called  by  that  name,  differ  much  in  their  characteristics.  Some 
strive  to  monopolize  certain  valuable  and  necessary  sources  of 
natural  wealth,  in  order  to  completely  control  production,  and, 
in  addition,  undertake  to  monopolize  every  avenue  of  distribu- 
tion so  completely  that  the  consumer  may  be  delivered  to  them, 
bound  hand  and  foot,  helpless  against  their  most  exorbitant 
demands,  and  all  this  for  the  enrichment  of  the  few  individuals 
who  have  contrived,  in  the  shifting  elements  of  a  new  era, 
to  gain  such  control. 

The  revolt  of  the  consumers,  the  masses,  may  well  be  bitter, 
and  it  is  likely  to  become  even  violent  if  aggressions  are  un- 
checked. In  fact,  rapacity  may  sooner  or  later  of  itself  react  to 
the  destruction  of  the  very  agents  who  promoted  it,  but  not, 
perhaps,  before  great  harm  is  done. 

Yet  this  abuse  of  methods  and  functions  does  not  at  all  in- 
validate the  fact  that  this  is  absolutely  the  era  of  association 
as  contrasted  with  individual  effort,  nor  does  the  foregoing  char- 
acterization apply  to  all  the  trusts. 

247 


Serious  problems,  indeed,  confront  us,  but  they  are  not  hope- 
less. For  this  consideration  this  conference  is  partly  called. 
In  intelligent  and  associated  use  of  the  powers  of  the  many  will 
be  found  the  solution.  Disorganized  and  violent  denunciation 
is  more  harmful  than  helpful.  Constructive  and  associated  ef- 
fort must  check  and  correct  the  abuses  which  have  grown  so 
rapidly  in  this  era  of  concentrated  methods  of  production  and 
distribution. 

The  wage-workers  of  the  country  are  setting  an  example  in 
this  respect.  Their  efforts  will  be  successful  in  proportion  to  the 
unity  of  their  effort  and  the  thoroughness  with  which  the  people 
at  large  realize  that  the  masses  are  one  in  interest  and  have  un- 
limited power  to  check  aggression,  if  they  but  assert  their  rights 
and  their  powers  and  use  them  constructively,  intelligently  and 
with  unswerving  persistence. 

We  cannot,  if  we  would,  turn  back  to  the  primitive  conditions 
of  industry  which  marked  the  early  part  of  the  last  century. 
It  is  therefore  idle  chatter  to  talk  of  annihilating  trusts. 

In  the  association  of  many  persons,  in  order  to  secure  the  large 
sums  of  money  necessary  to  finance  modern  industry,  lay  the 
germ  of  the  trust.  We  not  only  cannot  prevent  the  association 
of  these  vast  organizations  of  capital  in  what  we  call  trusts,  but 
in  some  sense  we  should  not  wish  to  do  so. 

TRUSTS  A  LOGICAL  DEVELOPMENT. 

The  trust  is,  economically  speaking,  the  logical  and  inevitable 
accompaniment  and  development  of  our  modern  commercial  and 
industrial  system. 

It  lessens  the  waste  in  production  which  is  bound  to  occur 
under  individual  initiative.  In  fact,  the  trust  may  be  said  to 
have  successfully  solved  the  problem  of  the  greatest  economy  in 
production.  It  has,  however,  other  important  functions  which 
as  a  rule  it  does  not  yet  properly  perform,  and  the  failure  in 
these  respects  very  justly  arouses  a  widespread  and  intense 
feeling  of  protest  among  the  masses  of  our  people. 

Asserting  that  the  trust  is  a  logical  and  an  inevitable  feature  of 
our  modern  system  of  industry  is  merely  stating  that  our  mod- 
ern plan  of  production,  which  for  brevity  and  convenience  we 
call  the  trust  system,  is  the  most  perfect  yet  attained.  We  do  not, 
however,  mean  to  imply  by  this  that  the  individuals  who 
form  trusts,  who  manipulate  them,  who  profit  by  them,  are 

248 


logically  and  inevitably  right  in  many  of  the  methods  they  em- 
ploy or  the  lengths  to  which  they  go.  Neither  do  we  concede 
the  argument  that  these  individuals  who  form  and  manage 
trusts  are  so  superior  a  class  of  beings  that  they  are  entitled  to 
the  enormous  largesse  which  m'any  of  them  claim  from  the 
profits  of  economical  production.  Quite  the  contrary  is  the  fact. 
Much  of  the  protest  against  trust  methods  is  justly  and  legiti- 
mately based  on  the  fact  that  trust  promoters,  managers  and 
owners  seize  and  keep  for  themselves  a  far  greater  share  of  the 
profits  of  modern  production  and  distribution  than  that  to  which 
they  are  entitled. 

Many  of  these  gentlemen  are  merely  fortunate  accidents  in 
the  crystallization  of  a  new  era.  They,  too,  often  forget  that 
they  are  bound  to  give  accounting,  to  do  justice  to  that  great 
force  which  makes  industry  possible — the  people  in  their  two 
capacities,  as  producers  and  consumers. 

Speaking  for  the  American  Federation  of  Labor,  including  as 
it  does  more  than  two  millions  of  wage-workers,  it  is  scarcely 
presumption  when  I  say  that  I  have  the  right  and  the  honor  at 
least  in  part  to  represent  the  masses  in  the  two  capacities  of 
producers  and  consumers. 

It  must  be  borne  in  mind  that  the  American  Federation  of 
Labor  speaks  for  labor — that  is,  for  the  masses  as  a  whole, 
whether  organized  or  unorganized.  The  trade  union  is  the  only 
successful  attempt  to  give  voice  to  the  "voiceless  masses." 

In  every  trade,  in  every  community  where  trade  unions  exist, 
they  are  recognized  as  the  spokesmen  of  the  workers  and  in 
fact  of  all  except  the  employing  and  the  idle  rich  classes.  None 
concede  this  more  promptly  than  the  unorganized  themselves, 
who  from  ignorance  or  adverse  environment  may  not  yet  be 
able  to  join  the  ranks  of  the  organized  workers.  But  they  look 
to  that  protector  of  their  rights  as  wage-workers  and  are  glad 
to  be  represented  by  their  more  advanced  fellow-workers. 

The  public  itself  does  not  seriously  question  that  the  trade 
unions  speak  for  all  labor,  and  hence  for  the  masses.  This  is 
seen  even  more  clearly  in  places  of  moderate  size  than  in  our 
largest  cities  where  the  constant  and  great  influx  of  ignorant 
foreign  immigration  continually  tends  to  disturb  the  normal  in- 
dustrial balance. 

THE  LABOR  UNION  IS  NOT  A  TRUST. 

It   must   be   remembered   that  the  trade   union,   while   not  a 

249 


trust,  is  just  as  inevitable  and  logical  a  development  as  the 
trust  itself.  The  trade  union  finds  its  greatest  development  under 
the  same  economic  conditions  which  produce  the  trust ;  that  is, 
the  introduction  of  machinery,  the  subdivision  of  industry,  the 
adoption  of  vast  and  complicated  systems  of  production  which 
obliterate  the  individuality  of  the  worker  and  thus  force  him 
into  an  association,  but  not  a  trust,  with  his  fellows  in  order 
that  collectively  they  may  protect  their  rights  as  wage  workers 
and  as  citizens,  and  also  guard  the  interests  of  all  workers. 

Let  me  reiterate  most  emphatically  here  and  now  that  the 
trade  union  is  not,  and  from  its  very  nature  cannot  be,  a  trust. 
It  is  sometimes  derisively  called  a  trust  by  those  who  expos  their 
own  ignorance  of  economic  first  principles  in  making  such  a 
statement. 

The  trade  union  is  the  voluntary  association  of  the  many  for 
the  benefit  of  all  the  community.  The  trust  is  the  voluntary  as- 
sociation of  the  few  for  their  own  benefit.  The  trade  union  puts 
no  limit  upon  its  membership,  except  that  of  skill  and 
character;  it  welcomes  every  wage- worker.  In  fact,  its  strength 
and  influence  rest  in  its  universal  adoption  by  the  wage-workers 
as  the  permanent  and  potent  method  of  voicing  their  needs.  Were 
every  wage- worker  in  the  country  a  member  of  organized  labor, 
still  there  would  be  no  labor  trust. 

Trusts  consist  of  organizations  for  the  control  of  the  pro- 
ducts of  labor.  Laborers  have  not  a  product  for  sale.  They 
possess  their  labor  power ;  that  is,  their  power  to  produce.  Cer- 
tainly there  cannot  be  a  trust  in  anything  which  has  not  been 
produced.  Hence,  for  this,  if  for  no  other  potent  reason,  it  is 
economically  unsound  as  well  as  it  is  untrue  to  designate  or- 
ganizations of  labor  as  trusts. 

The  trade  union,  through  association,  makes  production  more 
effective,  but  unlike  the  trust  it  does  not  seek  a  monopoly  of 
the  benefits  for  the  few.  The  trade  union  ever  seeks  to  dis- 
tribute the  benefits  of  modern  methods  of  production  among 
the  many.  It  sets  an  example  that  trust  promoters  may  well 
follow. 

As  producers,  as  wage-workers,  the  organized  men  of  the 
country  are  demonstrating  their  ability  to  cope  with  the  situa- 
tion. They  are,  as  a  result  of  their  own  efforts,  securing  fairer 
wages,  more  reasonable  hours  and  conditions  of  employment. 

250 


TRUSTS  AND  UNIONS  NOT  NECESSARILY  HOSTILE. 

It  is  only  fair  to  say  that  the  greatest  and  most  enlightened 
combinations  of  capital  in  industry  have  not  seriously  questioned 
the  right  and,  indeed,  the  advisability  of  organization  among 
employes.  There  is  economy  of  time  and  power  and  means  of 
placing  responsibility  in  "collective  bargaining"  with  employes 
which  bring  the  best  results  for  the  benefit  of  all. 

Organized  labor  has  less  difficulty  in  dealing  with  large  firms 
and  corporations  to-day  than  with'  many  individual  employers 
or  small  firms. 

We  have  recently  seen  examples  of  the  bitter  antagonism  to 
labor  by  certain  small  employers,  whose  ideas  of  industry  seem 
to  be  medieval  rather  than  modern.  To  some  extent  they  have 
grasped  the  idea  of  organization  or  association  among  them- 
selves, but  they  fail  to  concede  the  right  and  the  necessity  of 
organization  annong  wage-workers.  In  an  opera  bouffe  fashion 
they  emulate  the  robber  barons  of  the  middle  ages,  whose  sole 
idea  of  profit  was  to  plunder  the  individual  whom  they  could 
find  at  a  disadvantage. 

The  workers  of  the  country  have  pretty  thoroughly  mastered 
the  broad,  economic  truth  that  organization  is  the  watchword 
of  modern  industry.  Labor  concedes  the  right  of  organization 
among  employers.  It  is  perfectly  willing  to  deal  with  such  as- 
sociations, provided  its  own  rights  are  not  denied  or  invaded, 
to  put  it  more  strongly,  provided  its  rights  are  recognized  and 
conceded. 

Wage-workers,  speaking  for  themselves  and  for  the  masses, 
are  certain  that  they  in  their  capacity  as  producers  will  be  able 
to  protect  their  rights  and  interests.  The  progress  they  have 
made  thus  far  justifies  this  confidence.  As  to  the  future  the 
workers  are  alert  to  the  dangers  which  beset  them.  Owing  to 
the  logical  basis  on  which  the  trade  union  is  grounded  it  can 
and  will  adapt  its  course  to  every  changing  condition  which 
affects  its  existence  and  progress.  Intelligent  organized  labor 
constantly  urges  its  rightful  demands  on  modern  society. 

The  work  of  organization  will  go  on  with  increasing  vigor 
each  year,  until  every  worker,  skilled  and  unskilled,  is  a  member 
of  his  organization  and  educated  to  an  understanding  of  his 
rights,  both  civic  and  economic,  and  how  to  lawfully  protect 
them. 

251 


THE  TRUSTS  AND  THE  CONSUMERS. 

When  we  take  up  the  case  of  the  worker  as  a  consumer,  still 
speaking  for  the  masses,  the  situation  is  more  complicated.  The 
worker  has  not  yet  developed  the  same  capacity  to  protect 
himself  as  a  consumer  that  he  has  as  a  producer,  or,  rather,  to 
put  it  more  accurately,  trust  abuses  are  more  pronounced  in  the 
realm  of  distribution. 

Despite  the  lessened  cost  of  production  in  many  trust-con- 
trolled industries,  it  is  a  self-evident  and  painful  fact  that  prices 
in  the  past  decade  have  steadily  increased  to  the  consumer. 
The  toll  so  unjustly  exacted  is  the  more  exasperating  because 
the  trusts  carry  the  same  goods  to  foreign  marts  and  sell  them 
at  a  far  lower  figure  than  in  this  country,  thus  brazenly  chal- 
lenging the  consumers  of  this  country  to  unrest. 

This  control  of  vast  distributing  powers  by  certain  trusts  has 
been  acquired  through  means  which  are  only  beginning  to  be 
understood  by  the  people  at  large,  the  consumers. 

In  the  past  two  years  so  much  publicity  has  been  given  to 
trust  association  with  railroads  in  order  to  fleece  the  people 
that  it  is  hardly  necessary  to  refer  to  that  phase  here,  except  to 
say  that  honest  investigation  and  truthful  exposure  of  wrong 
conditions  are  as  invigorating  and  healthful  to  the  growth  of  a 
correct  public  opinion  as  fresh  air  and  sunlight  let  in  upon  the 
gloomy  den  of  the  sweater  of  human  labor. 

What  I  have  just  said  as  to  railroad  manipulation  applies 
equally  well  to  exposures  of  illegal  transactions  in  stock  and  to 
political  grafting  high  and  low. 

Such  information  is  the  first  step  toward  the  building  up  of  a 
healthy,  powerful  and  honest  public  opinion,  which  will  prove  a 
Nemesis  to  those  trust  manipulators  who  have  abused  their  true 
civic  and  economic  functions. 

The  organized  wage-workers  are  here,  as  ever,  in  the  van- 
guard of  public  opinion,  co-operating  with  their  fellow  citizens 
in  an  earnest  effort  to  find  the  equitable  remedy  for  the  abuses 
uncovered. 

The  courts  of  our  country,  too,  must  come  in  for  their  share 
of  attention.  The  function  of  the  judiciary  is  a  most  vital  one  to 
the  perpetuation  of  our  institutions  and  to  the  progress  of  our 
nation.  It  is  to  the  courts  that  we  must  look  in  many  instances 
for  protection  against  assaults  upon  our  rights  as  citizens. 

Yet  it  must  cause  us  all  regret  to  be  compelled  to  say  that  the 

252 


courts  in  too  many  instances  allow  themselves  to  be  bound  by 
precedents  which  either  have  no  application  to  present  industrial 
conditions  or  else  such  precedents  are  twisted  to  apply  most  in- 
juriously to  cases  to  which  they  never  were  intended  to  apply. 

Let  me  illustrate  on  one  point — the  abuse  of  injunctions.  In 
this  respect  we  find  the  courts  creating  new  dicta  which  in- 
variably oppress  the  wage-worker  and  encourage  the  abuse  of 
corporate  power. 

The  injunction  has  been  changed  from  its  original  beneficent 
intent  (to  protect  property  rights)  and  made  an  instrument  of 
oppression  to  deprive  citizens  (when  they  are  wage-earners)  of 
their  personal  rights  and  liberties.  By  its  abuse  men  are  re- 
strained from  doing  perfectly  lawful  things  and  then  found  in 
contempt  and  sentenced  to  imprisonment  without  trial  by  jury. 
It  is  an  alarming  state  of  affairs  when  a  judge  may  first  lay 
down  his  ex-parte  conception  (through  injunction)  of  what  a 
citizen  may  or  may  not  do  and  then  hale  the  alleged  offender 
before  him  for  judgment  and  sentence  without  trial  by  jury  or 
opportunity  for  defense.  The  injunction  process  as  now  em- 
ployed aims  to  deny  liberty  of  the  press  and  liberty  of  speech. 
In  a  case  now  pending  Mr.  Van  Cleave,  of  St.  Louis,  endeavors 
to  enjoin  ahe  American  Federationist,  the  official  magazine  of  the 
American  Federation  of  Labor,  from  stating  the  fact  that  his 
employes  have  found  him  unfair. 

CORPORATE  INFLUENCE  AND  JUDICIAL  ACTION. 

This  may  be  considered  far-fetched  in  one  sense  and  having 
nothing  to  do  with  trusts,  but  the  deterioration  or  invasion  of 
the  courts  bears  a  marked  coincidence  to  the  comparative 
growth  of  corporate  influence  in  recent  years.  I  do  not  charge 
or  intimate  that  judges  are  bribed,  or  anything  of  that  sort,  but 
there  is  no  doubt  in  the  mind  of  any  careful  observer  that  vast 
corporations,  wielding  many  sorts  of  influence,  do  find  them- 
selves exempt  from  interference  at  the  hands  of  the  courts,  even 
when  they  break  the  laws,  and  that,  conversely,  the  wage-work- 
ers find  their  rights  and  liberties  being  curtailed  by  these  same 
courts  who  are  so  complaisant  and  so  dilatory  about  enforcing 
sentence,  even  when  a  trust  has  been  found  guilty  of  violation 
of  law. 

Permit  me  another  illustration — over  and  over  again  have 
wage-workers  secured  from  legislatures  laws  absolutely  needed 

253 


for  the  protection  of. life  and  health  under  present  industrial 
conditions,  only  to  have  such  measures  declared  unconstitutional 
by  the  courts. 

We  have  found  Congress  and  Legislatures  only  too  dilatory 
in  the  passage  of  laws  necessary  to  protect  the  rights  of  the 
people  and  only  too  ready  to  let  trust  and  corporate  abuses  go 
unchecked.  I  do  not  say  these  things  in  vindictiveness  or  mal- 
ice. Had  I  the  time  at  my  disposal  I  could  amply  prove  by 
specific  example  far  more  than  I  assert  here.  I  speak  of  this 
dangerous  tendency  of  the  courts  because  it  is  most  important 
that  the  people  should  awake  to  the  danger  of  such  a  state  of 
affairs. 

The  masses — the  consumers — are  somewhat  to  blame  in  that 
they  have  so  far  inlostly  contented  themselves  with  restless  pro- 
test instead  of  constructive  effort. 

For  the  consumer  to  shout  "down  with  the  trusts"  because 
he  finds  his  pocketbook  affected  is  no  more  reasonable  than  the 
cry  of  "smash  the  machines"  which  was  once  heard  from  wage- 
workers  whose  means  of  livelihood  were  threatened  during  the 
period  of  adjustment  in  certain  trades  while  machinery  was  re- 
placing hand  labor. 

It  is  easy  to  comment  on  the  short-sightedness  of  the  poor, 
misguided  worker  who  had  no  organization  and  no  philosophy 
to  tide  him  over  the  period  of  adjustment  and  who  had  not  yet 
learned  to  fit  himself  to  the  new  conditions ;  but  it  does  not  seem 
so  easy  for  many  people  to  see  that  trust  smashing  is  quite  as 
impossible  a  remedy  for  the  evils  which  now  confront  them. 

CAN  TRUST  REFORM  BE  ATTAINED? 

It  must  be  trust  reform  in  order  that  our  vaunted  economy  in 
production  and  distribution  shall  inure  to  all  the  people  to  what- 
ever degree  they  are  entitled.  That  reform,  to  be  effective,  must 
come  from  another  source  than  that  now  generally  accepted. 
There  must  be  created  a  public  opinion  which  will  see  to  it  that 
the  will  of  the  people  and  not  the  mandate  of  corporate  influences 
shall  be  paramount.  What  we  want  is  a  more  democratic  spirit 
in  th  conduct  of  affairs,  industrial,  commercial,  executive,  legis- 
lative and  judicial. 

Our  courts  must,  indeed,  adapt  themselves  to  changing  condi 
tions,  but  they  must  do  this  with  the  welfare  of  the  people  as 
their  guiding  star. 

254 


If  our  Constitution  must  be  construed  liberally  in  order  to 
meet  new  conditions,  let  it  be  construed  to  give  the  masses  the 
greater  liberty  and  freedom  and  happiness  to  which  they  are 
entitled  under  the  most  wonderful  industrial  development  the 
world  has  ever  known. 

We  need  not  be  afraid  to  trust  the  people.  On  the  contrary, 
we  must  trust  them  more  and  more.  Let  the  aggregations  of 
wealth  which  seek  to  control  our  industries  remember  that  in 
the  last  analysis  they  must  depend  upon  the  labor  and  the  in- 
telligence and  the  willingness  of  the  masses.  Without  workers, 
who  are  law-abiding  and  intelligent  citizens,  to  produce  their 
goods,  and,  in  turn,  consume  them,  the  trusts  might  as  well  be 
in  the  desert  of  Sahara. 

TRUSTS  SHOULD  ACT  AS  TRUSTEES. 

Let  the  trusts  remember  that  they  will  be  required  to  give  an 
account  of  their  stewardship  to  the  people.  An  assumption  of 
divine  right  and  trusteeship  is  not  enough;  the  accounting  must 
square  with  the  assumption. 

The  greater  the  scope  of  trust  enterprise  the  heavier  its  weight 
of  responsibility  to  those  who  produce  and  consume  its  products. 

This  responsibility  to  the  masses  is  a  very  real  and  vital  thing. 
Upon  a  proper  appreciation  of  it  rests  our  hope  of  national 
progress. 

These  words  are  not  uttered  in  a  pessimistic  spirit.  On  the 
contrary,  I  have  full  faith  in  our  ability  as  a  people  to  deal  with 
all  problems,  and  I  believe  that  the  trusts  which  now  abuse  their 
powers  can  be  brought  to  see  that  it  is  better  policy  to  deal 
justly  rather  than  unjustly  with  those  whom  they  serve. 

The  toilers  of  our  country  are  the  most  intelligent  workers 
and  greatest  producers  of  any  of  the  workers  in  any  country. 
They  are  law-abiding,  faithful  and  patriotic  citizens.  Their  lives, 
hopes  and  aspirations  for  the  future  are  entwined  in  the  prog- 
ress and  advancement  of  our  republic,  for  whose  unity  they 
have  fought,  for  whose  perpetuation  they  strive.  They  have  or- 
ganized, united  and  federated  to  affirm  and  maintain  the  prin- 
ciples upon  which  the  institutions  of  our  republic  are  founded, 
to  make  them  the  watchword  in  the  every-day  course  of  life  of 
all  our  people. 

Labor  aims  to  co-operate  with  all  influential  and  powerful 
forces  for  the  attainment  of  the  greatest  good  to  all  our  people. 

255 


Asking  liberty  for  ourselves,  we  protest  against  its  denial  to 
others.  Any  movement  that  will  contribute  to  the  common 
weal  ought  not  and  cannot  be  regarded  as  unlawful  or  improper. 
Labor  and  industry  cannot  be  halted  or  turned  back  to  con- 
form to  old  conceptions  and  old  conditions.  It  deals  with  the 
present  and  for  the  future.  There  must  be  the  largest  liberty 
of  action,  the  freest  possible  opportunities  for  the  highest  de- 
velopment and  greatest  expansion  of  labor,  industry  and  com- 
merce to  make  for  the  common  good,  for  the  common  progress 
and  for  civilization. 

THE  CHAIRMAN:  The  Secretary  will  read  a  resolution 
offered  by  Mr.  Prussing. 

Secretary  Reynolds  read  the  following  resolution: 

Resolved.  That  this  National  Civic  Federation  Conference  on 
Corporations  institute  a  permanent  committee  on  the  law  of  cor- 
porations and  their  management,  consisting  of  one  member  from 
each  State  and  Territory,  to  be  selected  by  the  delegates  from  the 
respective  constituencies ;  that  said  committee  shall  endeavor  to 
formulate  a  code  on  said  subjects  for  enactment  by  each  State 
and  Territory,  and  shall  report  the  same  to  the  next  conference 
of  this  body  for  consideration. 

THE  CHAIRMAN :  The  resolution  will  be  referred  to  the 
Committee  on  Resolutions.  Now,  pursuant  to  announcement, 
the  meeting  4S  open  for  five-minute  talks  by  delegates.  The 
Secretary  will  have  some  announcements  which  he  will  make. 

SECRETARY  REYNOLDS:  I  am  requested  to  announce 
that  as  Mr.  John  M.  Stahl,  President  of  the  National  Farmers' 
Congress,  is  not  present,  Mr.  Aaron  Jones,  representing  the 
National  Grange,  will  be  substituted  for  him  among  the  dele- 
gates-at-large. 

The  Committee  on  Resolutions  will  meet  immediately  after 
the  close  of  this  session  in  Room  200  of  the  Stratford  Hotel. 

On  motion,  the  conference  then  adjourned  until  8:15  P.  M. 


256 


Sixth  Session,  October  23,  8  P.  M. 

The  session  was  called  to  order  by  Mr.  Samuel  Gompers  at 
8.15  P.  M. 

The  following  telegram  from  the  President  of  the  Association 
of  State  Railway  Commissioners  was  read  by  Secretary 
Reynolds : 

Louisville,  Ky.,  October  23,  1907. 
Chairman   National   Civic    Federation   Conference,    Studebaker 

Hall,  Chicago : 

I  regret  exceedingly  that  other  engagements  which  I  find 
impossible  to  postpone  will  prevent  my  presence  at  your  con- 
ference. The  subject  for  consideration  is  of  such  vast  import- 
ance that  there  must  be  a  solution  of  the  great  trust  and  com- 
bination problem.  I  believe  that  this  conference  will  be  pro- 
ductive of  great  good  to  all  interests. 

C.  C.  McChord. 

SECRETARY  REYNOLDS:  Mr.  Chairman  and  gentlemen, 
I  am  requested  by  the  Committee  on  Resolutions  to  announce 
that  the  last  opportunity  for  handing  in  resolutions  will  be  to- 
morrow noon,  so  that  resolutions  must  be  either  handed  in  at 
the  close  of  this  session  or  during  the  forenoon  session.  After 
the  close  of  the  session  to-morrow  morning  it  will  not  be  possi- 
ble to  receive  any  further  resolutions. 

THE  CHAIRMAN :  Ladies  and  gentlemen  of  the  confer- 
ence, I  have  the  pleasure  of  introducing  to  you,  if  an  introduc- 
tion is  necessary  of  a  gentleman  so  well  known,  Honorable 
Charles  G.  Dawes,  President  of  the  Central  Trust  Company, 
who  will  address  himself  to  the  subject,  "The  Sherman  Anti- 
Trust  Law." 

Hon.  Charles  G.  Dawes. 

Mr.  Chairman — When  a  nation  becomes  prosperous  it  becomes 
critical.     We  have  been  very  prosperous  in  this  nation,  and  it 

257 


seems  we  are  about  ending  a  period  of  greatest  prosperity.  We 
may  have  a  prosperous  future  before  us,  but  the  climax  of  pros- 
perity has  perhaps  been  reached,  and  I  hope  a  climax  of  criticism 
in  this  country.  Personally,  I  have  very  little  use  for  the  critic. 
We  are  living  and  have  lived  for  the  past  two  or  three  years  in 
an  atmosphere  of  criticism,  much  of  is  very  useful,  much  of  it, 
though  destructive,  very  useful. 

But  the  kind  of  criticism  we  want  and  of  which  we  have  not  had 
enough  as  yet  is  the  criticism  that  is  designed  to  tear  down  for 
the  purpose  of  building  up  afterwards,  and  the  kind  of  a  critic 
who  is  valuable  to  his  community  and  to  his  State  is  the  man  who 
criticises  not  simply  for  the  purpose  of  destroying  an  institu- 
tion or  of  destroying  a  man,  except  in  so  far  as  that  destruction 
is  necessary  to  the  accomplishment  of  a  reform.  Then  he,  too, 
must  bear  the  lash  of  criticism,  for  it  is  the  doers  and  not  the 
drones  who  attract  people's  attention  and  who  must  take  the 
lashings  of  these  gentlemen  who  like  to  tell  us  so  well  how 
things  should  be  done  in  this  country. 

DUBIOUS  PRODUCT  OF  THE  CRITICAL  SPIRIT. 

This  is  an  age  of  criticism.  We  had  another  such  period 
about  seventeen  years  ago,  and  at  the  end  of  that  period  of  the 
greatest  prosperity  which  the  country  had  then  known  for 
many  years,  in  a  period  of  protest  against  undoubted  corporate 
abuses  such  as  that  through  which  we  are  passing,  at  a  time 
when  there  was  wide-spread  protest  against  certain  corporation 
practices,  as  there  is  at  present,  at  a  time  when  hostile  legisla- 
tion was  being  enacted  in  the  different  State  Legislatures,  as 
there  is  at  present,  there  was  passed  this  hostile,  illy-conceived, 
superficial  legislation  which  is  called  the  Sherman  Anti-Trust 
Law.  Passed  without  due  consideration,  passed  in  a  period  of 
public  excitement;  radical  legislation,  it  has  until  recently  re- 
mjained  a  dead  letter  upon  the  statute  books  of  the  United 
States,  and  not  until  recently  has  any  attempt  been  made  to  use 
it  as  a  corrective  agent  of  reform  in  the  United  States. 

The  Sherman  Anti-Trust  Law  provides,  without  further  defini- 
tion, that  all  agreements  in  restraint  of  trade  are  criminal.  It 
does  not  define  the  crime.  It  includes  in  its  provisions  all  kinds 
of  trade  agreements  in  restraint  of  trade,  whether  publicly  bene- 
ficial or  publicly  detrimental. 

2.S8 


TRADE  AGREEMENTS  MAY  BE  BENEFICIAL. 

Now  this  is  the  day  of  the  trade  agreement.  We  have  agree- 
ments in  restraint  of  trade  which  are  unquestionably  of  public 
benefit.  An  agreement  among  manufacturers,  for  instance,  to 
compete  upon  pure  goods  only  as  distinguished  from  adulterated 
goods,  is  unquestionably  to  the  public  benefit,  and  yet  under  the 
provisions  of  the  Sherman  Anti-Trust  Law  it  is  as  criminal  as 
any  agreement  for  the  purpose  of  charging  extortionate  prices. 
An  agreement  among  manufacturers  to  prevent  the  undue  ac- 
cumulation of  fruits  or  meats  or  other  perishable  commodities 
at  places  where  the  demand  cannot  possibly  equal  the  supply 
and  where  the  accumulation  of  such  commodities  would  result 
in  a  loss  of  wealth,  which  is  injurious  both  to  the  producer  and 
to  the  community,  such  an  agreement  in  restraint  of  trade  is  to 
the  public  benefit.  An  agreement  not  to  sell  below  cost  even 
may  be  a  public  benefit  as  preserving  a  large  area  of  reasonable 
competition,  for  certainly  we  have  heard  a  great  deal  lately 
about  these  great  corporations  which  seek  to  secure  a  monopo- 
listic control  of  a  commodity  in  a  certain  district  for  the  sake  of 
raising  prices  later  after  crushing  out  local  competition.  We 
have  heard  the  greatest  complaint  about  that  form  of  competi- 
tion. So  that  I  say  an  agreement  in  restraint  of  trade  for  the 
purpose  of  preventing  selling  below  cost  may  be  a  public  benefit. 
Of  course  it  may  not  be  a  public  benefit.  It  may  be  for  the  pur- 
pose of  extorting  an  unreasonable  price,  and  if  such  an  agree- 
ment is  for  the  purpose  of  extorting  an  unreasonable  price  it 
should  be  put  under  the  ban  of  the  law,  as  it  is  under  the  ban  of 
the  Sherman  Anti-Trust  Law  at  present. 

ALL  TRADE  AGREEMENTS  ILLEGAL. 

But  the  point  I  wish  to  make  is  that  there  are  good  agree- 
ments in  restraint  of  trade,  agreements  in  restraint  of  trade 
publicly  beneficial,  as  well  as  those  which  are  publicly  detri- 
mental, and  that  the  Sherman  Anti-Trust  Law,  including  as  it 
does  good  agreements  with  bad  agreements,  is  a  law  which  is 
operating  to-day  against  the  proper  conduct  of  business  and  of 
commerce  in  the  United  States. 

In  the  first  place,  it  is  operating  against  the  proper  conduct 
of  business  because  the  crime  is  not  defined.  The  business  com- 
munity to-day  is  in  doubt  as  to  what  is  criminal  under  the  Sher- 
man Anti-Trust  Law  and  the  crime  has  not  yet  been  defined,  but 

259 


it  is  defined  only  as  each  case  arises  under  the  Sherman^  Anti- 
Trust  Law  through  court  decisions.  The  result  is  that  the  busi- 
ness community  is  in  doubt  as  to  what  constitutes  a  crime  under 
the  Sherman  Anti-Trust  Law. 

Now,  what  is  the  effect  of  that  upon  the  business  community? 
It  militates  against  the  scrupulous  man  in  business  and  in  favor 
of  the  unscrupulous  man  in  business,  for  the  reason  that  the 
scrupulous  man  desires  to  take  no  risk  with  the  law  and  refrains 
from  action,  and  the  unscrupulous  man  violates  the  law  with 
greater  impunity ;  for  experience  shows  that  in  this  country  and 
in  any  country  any  law  which  includes  actions  inherently  inno- 
cent with  those  inherently  guilty  under  its  ban  is  inevitably 
difficult  of  enforcement.  So  the  unscrupulous  man  violates  the 
law  with  greater  impunity  and  the  scrupulous  man  refrains  from 
action.  And  as  a  consequence  the  Sherman  Anti-Trust  Law  to- 
day is  encouraging  the  crushing  out  of  competition,  is  encour- 
aging the  formation  of  larger  corporations  all  the  time,  because 
they  can  do  legally  by  consolidation  what  they  cannot  do  legally 
under  the  Sherman  Anti-Trust  Law  as  separate  corporations 
through  a  trade  agreement. 

APPARENT  INEQUALITY  IN  ENFORCING  SHERMAN  LAW. 

Another  objection  to  the  Sherman  Anti-Trust  Law,  and  it  is 
a  very  serious  objection,  is  that  under  a  law  so  indefinite  in  its 
description  of  a  crime,  of  necessity  such  latitude  and  discretion 
is  given  to  the  executive  officers  of  the  Department  of  Justice 
in  their  right  to  proceed  against  corporations  and  against  in- 
dividuals that  inevitably  the  appearance  at  least  of  favoritism  is 
had  in  the  institution  and  in  the  bringing  of  those  cases.  Public 
sentiment  will  not  sustain  the  criminal  prosecution  of  those  men 
whose  business  seems  to  be  conducted  for  the  public  benefit 
and  whose  prosecution  seems  to  be  against  the  public  benefit, 
there  being  no  inherent  guilt  in  their  methods.  As  a  result  of 
this  latitude  which  is  given  of  necessity,  as  I  say,  to  the  execu- 
tive officers  of  the  Government  in  their  right  to  proceed  against 
corporations  and  against  individuals  there  has  been — and  I  do 
not  wish  to  say  this  to  cast  reflection  upon  the  rightfulness  of 
intention  of  the  Department  of  Justice — but  there  has  been  the 
appearance  of  favoritism  in  the  prosecutions  instituted  in  that 
Deparment.  In  the  case  against  the  Northern  Securities  Com- 
pany, suit  was  brought  against  the  corporation  alone.     In  the 

260 


case  against  the  packers  the  suit  was  brought  not  only  against 
the  corporation  but  against  the  individuals,  and  the  Government 
found  itself  in  that  latter  case  in  the  position  of  announcing 
through  one  department  that  the  business  was  not  a  monopoly 
and  was  conducted  at  a  reasonable  profit,  and  through  another 
department  at  the  same  time  seeking  to  put  the  owners  of  that 
business  into  jail  as  public  malefactors.  Other  instances  could 
be  cited. 

Another  thing,  the  fact  that  attacks  upon  men  of  prestige  and 
men  of  supposedly  high  character  and  men  of  position  are  made 
possible  under  this  law,  and  that  attacks  upon  men  who  do 
things,  attract  attention  in  this  country,  has  resulted  so  far  ap- 
parently in  an  inability  on  the  part  of  the  Department  of  Justice 
to  refrain  from  trying  their  case  in  the  newspapers  prior  to  the 
institution  of  the  case. 

LESSONS  OF  NORTHERN  SECURITIES  CASE. 

Now,  let  us  take  up  this  Northern  Securities  case  and  let  me 
explain  just  what  that  case  is,  in  order  that  we  may  see  the 
futility  of  a  penal  law  such  as  the  Sherman  Anti-Trust  Law 
when  an  attempt  is  made  to  use  it  as  a  corrective  of  assumed 
business  ills.  Now  follow  this:  The  Great  Northern  Railroad 
and  the  Northern  Pacific  Railroad  jointly  bought  the  stock  of 
the  Chicago,  Burlington  &  Quincy  Railroad  Company.  They 
then  formed  the  Chicago,  Burlington  &  Quincy  Railway  Com- 
pany, with  one  hundred  million  dollars  of  capital  stock,  and  this 
hundred  million  dollars  of  capital  stock  of  the  Chicago,  Burling- 
ton &  Quincy  Railway  Company  was  divided  equally  between 
the  Great  Northern  Railroad  and  the  Northern  Pacific  Railroad. 
Then  the  Chicago,  Burlington  &  Quincy  Railway  Company  is- 
sued $215,000,000  joint  four  per  cent  bonds,  guaranteed  by  the 
other  two  roads,  behind  which  bond  issue  was  placed  as  col- 
lateral security  the  stock  of  the  Chicago,  Burlington  &  Quincy 
Railroad  Company.  The  voting  power  of  the  stock,  therefore, 
of  the  Chicago,  Burlington  &  Quincy  Railroad  Company,  the 
road  which  made  the  rates,  the  road  which  it  was  desired  to 
wipe  out  as  a  competitor  of  the  other  two  roads,  passed  to  the 
Great  Northern  Railroad  Company,  and  to  the  Northern  Pa- 
cific Railroad  Company,  since  they  owned  the  stock,  half  and 
half,  of  the  Chicago,  Burlington  &  Quincy  Railway  Company. 
And  then  the  Northern  Securities   Company  was   formed  and 

261 


these  stock  certificates  of  the  Great  Northern  and  the  Northern 
Pacific  Railroads  were  put  into  the  hat  called  the  Northern  Se- 
curities Company  and  the  Northern  Securities  stock  issued  in 
their  place. 

Now,  the  Department  of  Justice  in  bringing  that  case  made 
no  attempt  to  have  adjudicated  the  status  of  the  $215,000,000  of 
joint  4's  of  the  Chicago,  Burlington  &  Quincy  Railway  Com- 
pany bonds  which  had  been  guaranteed  by  the  Great  Northern 
and  the  Northern  Pacific  Railroads.  Certainly,  if  any  step  in 
that  transaction  was  against  public  policy,  the  step  by 
which  the  independent  railroad — the  Chicago,  Burlington  & 
Quincy  Railroad — was  wiped  out  of  competitive  existence — 
certainly  if  any  step  should  have  been  attacked  in  the  Northern 
Securities  case  that  step,  which  was  the  financial  step-ladder 
over  which  the  whole  transaction  was  lifted,  should  have  been 
attacked,  but  it  was  not  attacked,  and  the  court  in  the  Northern 
Securities  case,  since  the  Department  of  Justice  had  not  at- 
tacked that  bond  issue  and  the  segregation  behind  it  of  the 
Chicago,  Burlington  &  Quincy  Railroad  stock,  simply  held  that 
the  Northern  Pacific  stock  and  the  Great  Northern  stock  which 
was  held  by  the  Northern  Securities  Company  should  be  traded 
for  the  stock  of  the  Northern  Securities  Company,  so  that  every 
man  who  had  a  certificate  of  stock  in  the  Northern  Securities 
Company  received  two  certificates  of  stock  in  lieu  of  it,  one  in 
the  Great  Northern  Company  and  the  other  in  the  Northern 
Pacific  Company.  That  involved  no  change  of  ownership. 
The  voting  power  which  controlled  this  great  Northwestern  sys- 
tem remained  in  the  same  men.  The  Northern  Securities  Com- 
pany had  done  its  work.  Conditions  had  been  changed  per- 
manently and  no  attempt  was  made  in  this  legal  effort  to  bring 
about  the  former  conditions.  Manifestly  the  Anti-Trust  Law 
proved  a  failure  so  far  as  any  improvement  or  practical  change 
in  the  condition  of  the  Northwestern  railway  situation  is  con- 
cerned. The  proper  remedy  should  have  been  sought  in  an 
effort  to  restore  the  old  conditions  of  competition,  not  in  chang- 
ing in  the  hands  of  the  same  owners  a  piece  of  white  paper  for 
a  piece  of  red  paper  and  a  piece  of  blue  paper,  the  certificates 
of  stock  in  the  Great  Northern  and  the  Northern  Pacific  Rail- 
roads for  one  of  the  Northern  Securities  Company.  And  why 
did  they  not  do  it?  Because  they  reasoned  that  to  attack  the 
security  of  the  innocent  holders  of  those  bonds  would  result  in 

262 


more  harm  than  it  would  good,  and  they  were  probably  right. 
But  what  hope  was  there  at  any  time  of  securing  any  practical 
change  in  the  railway  situation  in  the  Northwest  through  the 
Northern  Securities  case  when  they  left  undisturbed  the  segre- 
gation of  that  stock  behind  those  bonds  which  wiped  the  Chi- 
cago, Burlington  &  Quincy  Railroad  out  of  existence  as.  a  com- 
petitor of  the  other  two  roads.  And  yet  how  many  reputations 
have  been  built  up  on  the  Northern  Securities  decision.  The 
proper  law  would  provide  that  in  such  a  case  as  the  Northern 
Securities  case  it  should  be  first  determined  whether  or  not  that 
consolidation  was  for  the  public  interest  or  against  the  public 
interest.  If  it  should  be  held  by  some  tribunal  established  by 
our  Government  that  this  agreement  in  restraint  of  trade  was 
beneficial  to  the  Northwest  then  that  agreement  should  be 
sanctioned  and  upheld ;  and  if  it  was  found  to  be  publicly  detri- 
mental then  that  agreement  should  be  set  aside  and  the  law- 
should  provide  the  method  for  the  restoration  of  former  condi- 
tions. But  it  must  have  been  known  at  the  time  that  the  North- 
ern Securities  case  was  brought  that  it  could  result  in  nothing 
practical,  when  no  attempt  was  made  to  bring  into  court  the 
very  cornerstone  of  that  whole  transaction.  Give  us  honesty  of 
purpose;  give  us  those  men  in  charge  of  such  prosecutions  as 
these  who  will  take  action  when  they  believe  it  will  result  in 
practical  good  for  this  people  and  to  this  nation.  Every  at- 
tempt to  seek  the  enforcement  of  such  a  law  as  this  which  does 
not  succeed  tends  to  undermine  respect  for  all  law.  Every  un- 
enforced and  unenforcible  law  on  the  statute  books  of  the 
United  States  tends  to  undermine  respect  for  all  law.  The 
Sherman  Anti-Trust  Law  has  been  a  dead  letter  for  nearly  sev- 
enteen years ;  and  it  has  failed  thus  far  to  be  a  practical  benefit, 
though  attempts  have  been  made  to  use  it  recently  for  the  cor- 
rection of  existing  business  evils. 

SHERMAN  ACT  NEEDS  AMENDMENT. 

We  need  the  amendment  of  this  law.  We  need  first  a  clear 
definition  of  what  is  criminal  under  the  Sherman  Anti-Trust 
Law,  so  that  any  one  who  is  contemplating  an  agreement  in  re- 
straint of  trade  which  may  be  beneficial  or  which  may  not  be 
publicly  detrimental  shall  know  what  he  can  do  without  running 
the  risk  of  indictment  under  the  criminal  laws  of  the  United 
States  and  imprisonment  after  conviction.     One  of  the  promi- 

263 


nent  lawyers  of  the  city  of  Chicago  told  me  that  he  had  at  one 
time  not  long  ago  four  agreements  in  restraint  of  trade  brought 
to  him  by  clients,  two  of  which  were  publicly  beneficial  and  two 
of  which  were  not  publicly  detrimental,  and  he  was  unable  to 
advise  his  clients  that  they  could  enter  into  one  of  them  with- 
out running  the  risk  of  indictment. 

PUBLIC  SERVICE  RENDERED  BY  COMMERCIAL  LEADERS. 

I  am  going  to  say  here  something  to-night  about  the  men 
who  do  things  in  the  United  States.  I  have  gotten  tired  of  in- 
terminable criticism  of  men  who  are  doing  things  in  the  United 
States. 

Take  James  J.  Hill,  who  was  responsible  for  the  Northern 
Securities  Company,  starting  out  as  a  poor  boy  on  the  upper 
Mississippi,  checking  freight  on  a  steamboat  landing  and  shar- 
ing his  room  with  Philip  D.  Armour  in  order  to  save  expense — 
starting  from  small  beginnings,  but  a  great  man  and  a  man  who 
had  invagination — which  is  as  essential  in  great  undertakings 
as  the  commercial  instinct  itself — looking  out  to  the  great 
Northwest,  starting  with  his  small  road  and  extending  it  and 
sharing  his  profits  honestly  pro  rata  with  his  stockholders,  until 
in  1904  he  had  built  a  road  which  carried  eleven  million  tons 
of  freight  and  over  three  million  passengers.  He  was  build- 
ing up  other  fortunes  while  he  was  making  that  great  fortune 
of  his  own.  He  was  building  up  a  great  part  of  the  Northwest. 
He  was  creating  the  opportunity  for  thousands  of  industries. 
Where  was  it  in  the  course  of  that  career  from  a  poor  boy 
checking  freight  on  that  steamboat  landing  until  to-day,  when 
he  stands  at  the  head  of  that  great  road — tell  me  where  it  was 
that  James  J.  Hill  first  became  a  menace  to  the  people  of  the 
United  States  and  to  the  prosperity  of  this  country,  and  a  man 
properly  to  be  indicted  under  its  criminal  laws?  And  yet  James 
J.  Hill  is  practically  an  adjudicated  criminal  under  the  Northern 
Securities  case.  And  if  the  statute  of  limitations  has  not  run 
he  is  liable  to  indictment  and  after  trial  and  conviction  to  im- 
prisonment to-day. 

This  talk  by  the  muck-raking  magazine  critics  of  to-day  is 
one-sided.  Who  are  the  men  to-night  who  are  doing  the  most 
for  their  country  at  this  time?  In  the  city  of  New  York  to- 
night some  of  these  very  men  who  for  the  last  four  years  have 
borne  the  lash  are  doing  a  work  for  their  country  the  value  of 

264 


which  it  is  hard  to  estimate,  however  extravagant  might  be  our 
language.  As  you  and  I  will  sleep  in  peace  and  in  quiet  to- 
night devoted  men  in  that  great  financial  heart  of  our  nation 
will  be  awake  in  the  early  morning  hours  seeking  to  hold 
values,  seeking  to  prevent  the  destruction  of  confidence,  seek- 
ing to  uphold  credit  and  confidence,  upon  which  the  whole  pros- 
perity of  the  nation  depends.  Are  they  seeking  to  depress 
values  to-day  as  our  friends,  the  critics,  would  have  us  believe, 
in  order  that  they  may  reap  the  benefit?  No,  they  are  seeking 
to  uphold  the  credit  and  reputation  upon  which  prosperity  ex- 
ists. They  are  seeking  to  save  employment  for  thousands  of 
your  men,  Mr.  Gompers,  by  sustaining  credit  and  sustaining 
confidence.  They  are  seeking  to  save  the  opportunity  for  the 
profitable  continuance  of  you  who  are  merchandising,  of  you 
who  are  manufacturing,  of  you  who  are  in  any  of  the  various 
walks  of  business  life.  And  I  would  rather  have  half  a  dozen 
of  those  men  than  all  the  rnuck-raking  magazine  critics  that 
ever  walked  the  face  of  the  earth — those  men  who  point  out  a 
crack  in  the  sidewalk  and  claim  that  the  whole  town  is  going 
to  fall  through  it.  The  American  business  man  is  honest — the 
average  American  business  man.  He  wants  the  Sherman  Anti- 
Trust  Law  corrected,  because  he  believes  in  obeying  his  coun- 
try's laws,  because  he  has  accumulated  his  property  under  his 
country's  laws,  and  I  repel  the  assumption  of  so  many  in  these 
days,  that  the  American  business  man  is  a  man  who 
must  be  watched,  watched,  watched.  The  American  business 
man  stands  for  that  which  is  right  in  this  country.  He  is 
standing  for  that  which  is  right  in  this  country  to-day.  He 
asks  that  this  law  be  amended  so  that  he  can  pursue  his  busi- 
ness, that  business  which  is  proper  and  correct,  without  the  fear 
of  molestation  or  criminal  prosecution,  when  he  is  not  a 
criminal. 

LET  THE  LAW  DISCRIMINATE. 

Very  many  of  these  agreements  in  restraint  of  trade  are  for 
the  purpose  of  existing,  not  of  extorting.  But  for  some  not 
very  singular  reason  we  do  not  seem  to  have  at  this  time  that 
particular  kind  of  courage  in  statesmanship  which  leads  a  man 
io  stand  against  that  which  is  wrong  when  it  is  unpopular  to 
stand  against  it.  It  requires  no  great  courage  for  a  public  man 
who  exists  through  his  popularity  to  fight  the  Standard  Oil 

265 


Company  or  some  of  these  great  trusts.  That  which  is  true 
courage  in  statesmanship  is  the  standing  up  for  that  which  is 
right  but  that  which  is  unpopular,  and  which  will  bring  down  up- 
on the  man  who  so  stands  the  castigation  instead  of  the  applause 
of  the  radical  portion  of  our  people.  We  need  more  of  such 
leadership  to  stand  for  that  which  is  right,  and  in  this  country  of 
ours  the  mlan  who  nails  himself  to  a  right  principle  in  the  long 
run  will  be  vindicated.  But  while  we  have  those  who  are  stand- 
ing for  radical  railway  legislation — and  I  do  not  say  that  it  is 
not  needed — while  we  have  those  who  do  not  hesitate  to  seize 
leadership  in  those  reforms  which  are  pleasing  to  the  radical 
portion  of  our  people,  we  do  not  seem  to  have  that  leadership 
which  will  stand  for  the  reform  of  a  radical,  ineffective,  exist- 
ing law  like  the  Sherman  Anti-Trust  Law  when  such  action  on 
their  part  will  bring  down  the  castigation  of  the  public  instead  of 
its  applause.  What  the  business  man  wants  to  do  is  what  you 
are  endeavoring  to  do — you  who  represent  the  laboring  men 
of  the  United  States  (addressing  Mr.  Gompers)  when  you  are  « 
seeking  to  prevent  that  kind  of  competition  which  crushes  out 
life — when  you  are  seeking  to  bring  about  co-operation  and 
better  understanding  between  those  who  employ  and  those  who 
are  employed.  You  have  singularly  good  fortune  in  not  being 
opposed  by  the  politician.  The  business  man  in  attempting  to 
secure  fair  and  honest  co-operation  may  not  meet  with  the 
opposition  of  politicians,  but  he  meets  with  very  indifferent  sup- 
port. If  we  are  going  to  make  any  progress  in  this  vexed  ques- 
tion the  Shermian  Anti-Trust  Law  must  be  amended  so  as  to 
clearly  define  what  the  crime  is.  Provision  must  be  made  by 
which  agreements  in  restraint  of  trade  can  be  submitted  to  some 
tribunal  acting  in  the  interest  of  the  public  and  representing 
them,  before  which  such  agreements  can  be  tried  in  their  rela- 
tion to  the  public  interest.  Then  such  agreements,  whether  in 
restraint  of  trade  or  not,  if  not  publicly  detrimental,  or  if  pub- 
licly beneficial,  must  be  permitted,  and  if  for  the  purpose  of 
extorting  an  unreasonable  price  or  otherwise  publicly  detri- 
mental they  should  be  put  under  the  ban  of  the  law,  and  if  con- 
sumated  the  offenders  should  be  punished. 

THE  CHAIRMAN:  I  am  sure  we  have  all  been  very 
greatly  benefited  by  the  address  of  Mr.  Dawes.  His  points 
are  telling  and  effective.  The  only  dissent  that  the  chair  would 
express  from  this  statement  was  that  we  as  the  representatives 

266 


of  labor  have  been  fortunate  in  not  having  the  opposition  of 
politicians.  We  do  not  often  have  it  openly — but  nevertheless 
effectively. 

By  agreement  with  the  Committee  on  Program  Mr.  Tompkins 
has  agreed  to  deliver  his  address,  "The  Railways  and  the  Peo- 
ple," to-morrow  morning,  and  in  his  stead  a  gentlemen  who  was 
to  have  spoken  at  a  later  session  will  address  us  now,  Mr. 
Grange  Sard,  of  Albany,  N.  Y.,  whose  subject  is  "Evils  of  Com- 
petition." 

Mr.  Grange  Sard. 

Mr.  Chairman — We  have  observed,  I  think  generally,  that  when 
the  subject  of  trusts  is  being  considered  the  Standard  Oil  is  al- 
ways taken  as  a  typical  representative  trust,  as  representing  trusts, 
combinations,  consolidations  and  all  of  those  mischievous  things 
that  the  Sherman  law  is  supposed  to  be  opposed  to.  The  Standard 
Oil  has  had  an  experience  of  many  years,  and  during  a  part  of  that 
time  all  merchants  and  shippers  and  manufacturers  were  doing 
substantially  the  same  thing  that  the  Standard  Oil  was  doing.  It  is 
unfortunate  that  none  of  these  wicked  trusts  have  any  advocates 
before  a  meeting  of  this  kind,  and  I  do  not  stand  here  as  at- 
torney for  any  of  these  trusts,  but  I  feel  that  it  might  be  proper 
for  me  to  briefly  suggest  that  when  we  talk  of  all  the  sin  of 
these  trusts,  such  as  the  Standard  Oil,  we  should  also  take  into 
account  the  fact  that  they  have  done  a  great  many  good  and 
wonderful  things  for  the  good  of  this  country,  greatly  for  pub- 
lic benefit,  and  that  the  beneficiaries  of  the  Standard  Oil,  those 
men  who  are  supposed  to  reap  all  these  great  gains,  have  made 
magnificent  use  of  much  of  their  money.  It  is  most  unfortunate, 
in  my  humble  judgment,  that  while  these  particular  trusts  are 
being  so  badly  prosecuted — I  don't  pretend  to  say  that  they 
don't  need  reformation — that  all  the  other  industries  of  the 
country  must  be  made  to  suffer  with  them  at  this  time.  The  in- 
nocent and  the  guilty  are  suffering  together  now.  Those  of  us 
who  have  to  do  with  affairs  and  are  connected  with  the  manu- 
facturing, and  especially  with  the  banking,  interests  of  the  coun- 
try— and  I  am  fortunate  enough  to  be  connected  with  both — 
realize  how  serious  is  the  situation  at  this  time;  what  great 
suffering  and  harm  is  being  endured  by  innocent  people — people 
who  are  not  of  the  sort  that  the  Sherman  Law  is  intended  to 
oppress,  but  people  who  have  invested  their  savings  and  the 

267 


fruit  of  their  self-denial  in  securities  which  the  shrinkage  of  the 
market  has  taken  away  from  them.  So  that  while  there  is  rea- 
son for  the  Sherman  Law,  and  while  there  is  need  of  reform,  I 
wish  to  say  that  everybody  who  is  engaged  in  manufacturing 
business  and  everybody  who  desires  to  work  harmoniously  with 
his  competitors,  while  he  may  be  in  the  eyes  of  this  law  a  crim- 
inal, yet  he  is  not. 

PRESENT  LAWS  OBSTRUCT  BUSINESS. 

When  Governor  Hughes,  of  New  York,  asked  me  to  come 
here  as  a  delegate  from  that  State  I  thought  that  I  ought  to  do 
so,  because  I  wanted  to  say  a  few  words  for  the  manufacturers 
of  this  country — not  those  large  organizations  that  represent 
the  capital  of  ten  or  twenty  or  thirty  or  more  millions,  since,  as 
was  said  this  afternoon  by  one  of  the  speakers,  it  is  only  the 
minority  of  manufacturers  who  have  these  large  aggregations 
of  capital.  The  great  majority  of  thousands  and  tens  of  thou- 
sands of  manufacturers,  who  employ  hundreds  and  thousands 
and  millions  of  workingmen,  belong  to  the  somewhat  smaller 
class  of  manufacturers  who  do  a  large  business,  who  want  to 
do  business  honestly  according  to  the  law,  and  yet  they  feel 
under  the  present  Sherman  Law  it  is  impossible  for  them  to 
make  agreements  which  are  perfectly  reasonable  in  themselves, 
that  are  not  for  the  disadvantage  of  their  companies,  that  are 
distinctly  for  the  advantage  of  their  workingmen,  but  the  law 
forbids  it;  and  I  wish,  in  a  very  few  words  and  a  very  short 
time,  to  mention  to  you  what  are  some  of  the  evils  of  competi- 
tion. 

UNLIMITED  COMPETITION  AN  EVIL. 

The  existing  tariff  laws  in  this  country  are  based  upon  the 
belief  that  it  is  for  the  general  good  to  exclude  foreign  manu- 
facturers from  supplying  American  consumers  with  articles  that 
can  be  produced  here,  even  if  they  will  do  so  at  a  lower  price. 

This  is  an  admission  that  unlimited  competition  is  an  evil. 
It  is  our  purpose  to  point  out  that  the  result  of  unlimited,  un- 
regulated competition  between  domestic  manufacturers  is  also 
an  evil,  alike  to  the  community,  to  capital  and  to  the  labor  which 
is  employed  in  production. 

There  are  no  traders  more  energetic  and  enterprising  than 

268 


the  American.  The  striving  for  business  among  rivals  is  keen 
and  relentless.  The  man  who  has  the  business  suffers  attack 
from  the  men  who  want  it.  The  method  of  attack  is  by  offer- 
ing lower  prices  or  selling  goods  of  greater  cost  and  value  at 
equal  prices ;  by  giving  more  favorable  terms  of  payment,  larger 
discounts  for  cash,  more  favorable  freight  allowances,  or  by 
making  secret  rebates. 

The  manufacturer  who  is  attacked  is  compelled  to  protect 
himself  by  meeting  the  offers.  This  develops  into  a  species  of 
warfare.  There  are  thousands  of  buyers  who  profit  by  originat- 
ing and  encouraging  this  warfare.  There  are  thousands  of  sales- 
men who  are  too  often  more  interested  in  the  volume  of  their 
sales  than  in  the  resulting  profits,  and  who  are  misled  as  to  what 
the  competitor  is  doing.  The  salesman  is  led  to  believe  the 
half-truths  which  the  shrewd  buyer  would  have  him  believe ; 
other  salesmen  similarly  constituted  confirm  the  reports  as  to 
the  cutting  of  prices,  terms,  etc.,  and,  as  these  various  state- 
ments reach  the  principals  from  so  many  sources,  and  there  is 
no  way  by  which  their  accuracy  can  be  tested,  or  their  falsity 
proved,  it  is  inevitable  that  the  basis  of  selling  prices  should  be 
undermined.  Demoralization  ensues.  The  question  of  profits 
goes  by  the  board,  and  the  producer,  who  sees  ruin  staring 
him  in  the  face,  struggles  to  save  himself  by  the  lowering  of  the 
quality  of  his  goods,  using  inferior  materials ;  by  reducing  the 
wages,  and  the  multiplication  of  these  disasters  brings  about 
him  as  a  victim ;  his  creditors  lose  heavily ;  his  reputation  is  in- 
jured his  family  life  is  darkened  and  the  general  result  is  not 
less  evil  than  if  these  unhappy  conditions  were  brought  about 
by  a  foreign  manufacturer  whose  goods  came  into  this  country 
duty  free. 

Unregulated  competition  is  "war  to  the  knife"  with  the  un- 
civilized "survival  of  the  fittest."  The  weak  are  pushed  under 
by  the  strong.  The  man  of  small  capital  stands  no  chance 
against  the  endurance  of  the  very  rich.  The  workmen,  with 
their  wives  and  children,  suffer  from  the  loss  of  or  reduction  in 
wages,  and  the  multiplication  of  these  disasters  brings  about 
hard  times,  panics  and  financial  stress. 

THE  MENACE  OF  THE  BANKRUPT  COMPETITOR. 

It  is  a  well-known  fact  that  it  is  only  a  small  minority  of  those 
who  engage  in  business  that  are  successful. 

26Q 


The  insolvent  manufacturer  may  settle  his  debts  at  25  or  50 
cents  on  a  dollar  and  again  resume  business,  or  the  sheriff  may 
sell  out  the  business  at  a  forced  sale  at  a  similar  reduction  from 
values,  and  the  factory  resumes  operations.  In  either  case  the 
insolvent  man  whose  liabilities  have  been  scaled  down,  or  his 
successor,  who  has  purchased  the  plant,  materials  and  merchan- 
dise at  half  price  or  less,  can  again  compete  with  the  solvent 
manufacturer,  and  the  ruinous  competition  is  resumed  under 
conditions  most  unfavorable  to  the  careful  trader. 

Bankrupt  concerns  work  havoc  everywhere.  The  wrecked, 
half-derelict  concern,  improperly  managed,  inefficiently  manned, 
with  no  intelligent  policy,  is  a  menace,  with  great  powers  for 
mischief. 

It  is  not  desirable  to  have  business  conducted  unprofitably, 
and  to  have  unwise  competition  destroy  the  prospects  of  those 
who  are  careful,  skilful  and  successful.  It  is  most  desirable  to 
prevent  failures  and  to  protect  the  capital  which  is  invested  in 
manufacturing  from  the  reckless  and  unwise  competition  that 
leads  to  destruction. 

NEED  OF  REGULATING  COMPETITION. 

A  system  of  regulated  competition  will  prevent,  in  a  large 
measure,  the  practices  which  bring  about  the  unhappy  condi- 
tions just  described.  Capital  will  seek  investment  in  smaller 
manufacturing  establishments  all  over  the  country,  because  it 
will  be  more  safe,  the  dividends  more  certain  and  the  securities 
more  marketable.  Securities  of  local  manufacturing  concerns 
generally  at  present  lack  these  qualities,  with  rare  exceptions. 

In  these  days,  when  peaceful  methods  between  nations  are 
being  promoted,  there  is  also  a  movement  to  bring  into  har- 
monious relations  those  who  in  their  business  activities  have 
been  violently  striving  to  build  up  themselves  by  pulling  down 
others. 

FUNCTION  OF  MANUFACTURERS*  ASSOCIATIONS. 

The  tendency  to  association  and  co-operation  of  those  who 
have  similar  desires,  views  and  occupations  has  not  passed  by 
the  man  of  business,  nor  the  man  who  labors.  They  have  seen 
and  felt  a  desire  to  prevent  the  havoc  of  industrial  warfare. 

The  means  which  are  presented  for  regulating  competition 
and  preventing  wasteful  industrial  warfare  are  the  formation  of 

270 


trade  associations,  or  establishing  in  some  form  a  community 
of  interests,  by  arranging  pools,  selling  agencies,  and  the  various 
methods  which  are  in  general  called  "trusts."  All  of  these 
means  for  establishing  harmonious  relations  will  surely  fail  if 
they  have  for  their  purpose  the  exaction  of  excessive  prices  on 
any  commodity  or  article  of  manufacture. 

It  must  be  understood  that  the  men  who  bring  about  the 
demoralization  of  prices,  terms,  etc.,  are  not  bad  men,  but  they 
are  generally  inexperienced  men  who  unwittingly  attempt  to 
secure  business  on  terms  which  they  do  not  know  lead  to  dis- 
aster. But  when  men  are  brought  together  for  commercial 
harmony  the  weak  man  is  the  greatest  gainer.  The  successful 
men  dominate  and  teach  the  inexperienced  what  is  good  and 
what  is  bad. 

Any  association  which  establishes  conditions  which  are  un- 
favorable to  the  community  by  putting  up  prices  unduly  is  most 
unwise.  It  has  inherent  defects  which  will  surely  destroy  its 
usefulness. 

The  difficulties  in  the  way  of  bringing  about  harmonious  com- 
petition are  very  great,  but  the  maintenance  of  such  organiza- 
tions is  still  more  difficult.  "Gentlemen's  agreements"  are  no- 
toriously shortlived.  Their  success  depends  upon  their  modera- 
tion as' much  as  upon  the  good  faith  and  intelligence  of  those 
who  participate  in  them. 

UNREGULATED    COMPETITION   A    GREATER   EVIL   THAN   COM- 
BINATION. 

We  submit  that  the  evils  of  unregulated  competition  are  much 
more  serious  than  the  possible  evils  of  combinations,  consoli- 
dations and  trusts.  A  salutary  check  upon  greed  will  be  the 
letting  down  by  degrees  of  the  tariff  wall  which  has  excluded 
the  regulating  influence  of  foreign  competition.  We  are  in 
greater  danger  from  too  much  governmental  regulation  than 
from  some  of  the  evils  which  it  proposes  to  remedy.  There 
are  natural  laws  in  force  that  do  not  need  to  be  supplemented 
by  legislative  enactment,  except  it  be  for  political  purposes. 
There  are  economic  forces  in  operation  more  inexorable  than 
acts  of  'Congress  which  serve  to  protect  the  community  from 
imposition.  There  is  danger  in  enacting  a  law  that  may  have 
a  good  purpose,  but  which  may  do  infinite  harm  in  its  execu- 
tion or  interpretation. 

271 


The  "Sherman  Law"  as  it  stands  is  a  cause  of  greater  evils 
than  those  it  was  intended  to  remedy.  If  its  defects  cannot  be 
quickly  eliminated  it  were  better  that  it  should  be  repealed, 
preparatory  to  enacting  a  new  law  which  shall  be  beneficent 
in  its  effects,  which  it  will  be  possible  to  enforce,  and  which  the 
entire  business  community  can  respect  and  obey. 

As  the  situation  exists  to-day  nearly  all  the  laws  are  being 
violated,  and  I  appeal,  in  behalf  of  the  manufacturers  of  this 
country,  that  such  action  may  be  taken  and  such  laws  may  be 
passed  that  we  may  all  feel  that  we  are  engaged  in  our  voca- 
tion in  such  way  that  we  are  not  violators  of  the  law,  and  that 
our  acts  are  within  the  law ;  therefore  entitled  to  the  protection 
of  the  law. 

THE  CHAIRMAN:  I  now  have  the  honor  and  pleasure  of 
presenting  to  you  Mr.  Robert  Mather,  of  New  York,  who  will 
address  you  upon  the  question  of  the  "Regulation  of  Transpor- 
tation Rates." 

Mr.  Robert  Mather. 

Mr.  Chairman — Three  years  ago  President  Roosevelt  recom- 
mended to  Congress,  as  the  most  important  legislation  then  need- 
ed for  the  regulation  of  corporations,  the  enactment  of  a  law  con- 
ferring upon  the  Interstate  Commerce  Commission  the  power  to 
rvise  and  prescribe  the  rates  that  should  be  charged  for  interstate 
transportation.  In  common  with  many  others,  I  thought  it  un- 
wise to  grant  this  power  to  the  commission,  and  appeared  before 
the  Senate  Committee  on  Interstate  Commerce  to  argue  against 
the  proposed  legislation.  I  come  here  to-day  to  admit  that  the 
action  taken  in  pursuance  of  that  recommendation  was  wise,  and 
to  advocate  an  enlargement  of  the  rate-making  power  of  the 
Federal  commission. 

POWERS  OF  THE  INTERSTATE  COMMERCE  COMMISSION. 

Though  the  commission  has  been  in  possession  of  the  rate- 
making  power  for  more  than  a  year,  the  power  has  not  yet  been 
directly  exercised.  Within  that  year,  however,  the  rate-making 
and  other  regulatory  powers  of  the  several  States  have  been 
exercised  to  an  extent  and  in  a  degree  unparalleled  in  any  pre- 
vious period.  Some  of  these  requirements  are  in  direct  con- 
flict with  Congressional  regulation  of  the  same  subject. 
Others  indirectly  but   quite   as   effectually   invade  the   proper 

272 


sphere  of  Federal  influence  and  power.  The  Hepburn  Act  re- 
quires the  Interstate  Commerce  Commission  to  prescribe  for 
common  carriers  the  method  of  keeping  their  accounts,  and 
makes  it  unlawful  for  such  carriers  to  keep  any  other  accounts, 
records  or  memoranda  than  those  prescribed  by  the  commis- 
sion under  penalty  of  $500  for  each  offense  and  for  each  and 
every  day  of  the  continuance  of  such  offense.  In  the  teeth  of 
this  Federal  regulation  a  State  Commission  prescribes  other 
methods  of  keeping  the  accounts  of  carriers  relating  to  their 
interstate  business,  and  disclaims  any  desire  to  discuss  with  the 
Interstate  Commission  the  palpable  conflict  between  State  reg- 
ulation and  Federal  law.  State  laws  have  reduced  the  passen- 
ger fares  and  rates  of  freight,  and  upon  complaint  and  showing 
by  the  carriers  that  the  reduced  rates  are  so  far  below  the  point 
of  reasonable  compensation  as  to  amount  to  a  taking  of  their 
property  without  due  compensation  and  a  denial  to  them  of  the 
equal  protection  of  the  laws7the  consequent  and  logical  appeal 
to  the  Federal  courts  for  the  protection  assured  to  them  by  the 
Federal  Constitution  has  been  met  by  the  claim  that  no  injunc- 
tion of  a  Federal  court  can  issue  against  the  enforcement  of  the 
State  law  except  upon  final  decree  in  the  Supreme  Court  of  the 
United  States.  And  to  the  support  of  this  novel  theory,  re- 
futed by  the  uniform  practice  of  the  Federal  courts  since  their 
institution,  State  executives  have  pledged  the  martial  power  of 
their  States.  Conflict  more  serious  in  its  threatened  conse- 
quences than  that  of  the  courts  has  been  narrowly  averted,  and 
temporary  obedience  to  enactments  that  may  yet  be  adjudged 
to  be  not  the  law  of  the  land,  because  violative  of  protective 
provisions  of  the  national  Constitution,  has  been  compelled  by 
threat  of  force. 

HOW  STATE  LAWS  MAKE  INTERSTATE  RATES. 

The  State  laws  over  which  these  unseemly  contests  are  being- 
fought  purport  only  to  make  the  rates  from  point  to  point 
within  the  State.  As  a  matter  of  fact,  they  make  the  interstate 
rates  as  effectively  and  inevitably  as  if,  in  the  exercise  of  plenary 
power,  they  declared  that  to  be  their  unhidden  purpose.  So 
national  in  character  has  become  our  imposing  commeice,  so 
diverse  in  location  the  lines  that  bid  for  the  movement  of  its 
tonnage,  so  numberless  the  markets  it  seeks  to  reach  and  so 
many  the  ports  through  which  it  may  pass,  that  any  change 

27.3 


over  any  given  territory,  however  local  or  circumscribed,  in 
the  rate  on  any  commodity  furnishing  large  tonnage  to  the  rail- 
roads finds  immediate  and  inevitable  reflection  in  all  the  rates 
for  the  movement  of  that  commodity  over  all  the  routes  from 
the  point  of  production  to  the  point  of  consumption  or  of  ex- 
port. Inexorable  laws  of  business  force  this  result,  without  the 
aid  and  beyond  the  power  of  prevention  of  any  laws  of  man. 
It  needs  not,  therefore,  the  intimation  of  the  Interstate  Com- 
merce Commission  that  the  interstate  rate  must  not  exceed  the 
sum  of  the  locals  to  demonstrate  the  perfect  practical  power  of 
the  States  to  prescribe  the  interstate  rates. 

Let  me  make  this  plain.  Arkansas  reduces  the  rate  for  the 
carriage  of  passengers  from  point  to  point  within  the  State  from 
three  cents  to  two  cents  per  mile.  Thereby,  though  the  rates 
in  Missouri,  in  Louisiana  and  in  Texas  remain  unchanged,  the 
interstate  rate  from  St.  Louis  to  Galveston  or  New  Orleans  is 
proportionately  reduced  without  affirmative  action  either  by 
the  carrier  or  by  the  Interstate  Commerce  Commission.  For 
the  expedient  is  clearly  open  to  the  passenger  to  buy  his  ticket 
to  the  first  station  in  Arkansas,  then  to  avail  himself  of  the 
reduced  local  rates  to  the  last  station  in  the  State,  and  thence 
to  pay  the  former  rate  to  his  destination.  And  this  effective 
reduction  by  State  law  of  the  interstate  rate  through  Missouri, 
Arkansas  and  Texas  or  Louisiana  works  just  as  inevitably, 
through  the  operation  of  the  inflexible  law  of  competition,  a 
like  reduction  in  the  rate  from  St.  Louis  to  New  Orleans  over 
the  Illinois  Central  Railroad,  whose  line,  passing  through  Illi- 
nois, Kentucky,  Tennessee  and  Louisiana,  nowhere  touches  the 
soil  of  the  regulating  State.  In  the  face  of  such  an  unalterable 
situation  the  Federal  rate-making  body  admits  its  impotence 
rather  than  asserts  its  power  when  it  rules  that  the  through  rate 
shall  not  exceed  the  sum  of  the  locals. 

The  State  of  Texas  produced  in  1906  fourteen  million  bushels 
of  winter  wheat.  Its  Railroad  Commission  made  the  rate  under 
which  there  was  moved  to  market  192,000,000  other  bushels  of 
winter  wheat  raised  in  Oklahoma,  Indian  Territory,  Kansas, 
Nebraska,  Missouri,  Arkansas  and  Iowa.  In  the  same  year 
the  corn  crop  of  Texas  was  155,804,782  bushels;  that  of  the 
other  States  named  exceeded  1,233,000,000  bushels.  Yet  Texas, 
in  the  exercise  of  a  conceded  and  apparently  unassailable  power 
to  fix  the  rate  at  which  the  155,000,000  bushel  of  corn  grown 

274 


within  her  borders  shall  move  to  ports  on  her  own  seaboard, 
fixes  beyond  the  power  of  the  carriers  or  of  the  Federal  Com- 
mission to  disturb  the  rate  at  which  the  billion  and  more  bush- 
els raised  by  the  other  States  shall  be  carried  to  ship  side. 

STATE    LAWS    NULLIFYING    CONSTITUTIONAL    GUARANTEES. 

At  the  same  time  that  the  power  to  regulate  commerce  among 
the  States  was  surrendered  by  the  States  to  the  Federal  Gov- 
ernment, and  as  a  condition,  of  that  surrender  the  builders  of 
the  Constitution  fastened  into  that  well-rounded  instrument 
this  provision: 

"No  preference  shall  be  given  by  any  regulation  of  commerce 
or  revenue  to  ports  of  one  State  over  those  of  another." 

It  is  inconceivable  that  the  Interstate  Commerce  Commission, 
in  the  exercise  of  its  rate-making  power,  should  ever,  with  this 
Constitutional  provision  before  them,  make  a  rate  so  prefer- 
ential to  Texas  ports  as  to  force  through  them  alone,  to  the 
exclusion  of  all  Atlantic  and  other  Gulf  ports,  the  vast  volume 
of  grain  which  the  fertile  soil  between  the  Allegheny  and  the 
Rocky  Mountains  annually  produces  for  export.  Yet  the  State 
of  Texas,  if  past  theories  are  to  prevail,  has  ample  power  to 
produce  that  result,  unhampered  by  the  Constitutional  limita- 
tion that  the  builders  of  the  Union  framed  to  prevent  it.  And 
the  day  when  she  will  accomplish  the  result  is  only  postponed 
to  the  time  when  the  facilities  of  her  ports  shall  be  ample  to 
the  task.  And  if,  by  her  drastic  action,  the  revenues  of  the  rail- 
roads are  shrunk  below  the  level  of  that  fair  compensation  to 
which,  under  the  law,  they  are  entitled,  the  other  traffic  of  the 
country  must  be  burdened  to  make  up  the  deficit. 

I  have  used  Texas  as  an  illustration  not  in  any  spirit  of  criti- 
cism of  her  past  or  her  possible  action,  but  only  because  the 
possibilities  of  her  magnificent  situation  lend  point  to  my  argu- 
ment. I  might  as  well  have  said  Missouri,  whose  local  grain 
rate  from  Kansas  City  to  St.  Louis,  both  points  within  the 
State,  controls  the  interstate  rates  on  grain  to  the  Atlantic 
ports.  If  the  natural  resources,  the  location  or  the  other  ad- 
vantages of  any  State  enable  her,  under  the  Constitution,  to 
surpass  her  sister  States  in  commercial  achievement,  she  would 
be  a  traitor  to  her  destiny  if  she  failed  to  press  the  advantage 
to  its  farthest  possibilities.  But  if  I  read  aright,  the  spirit  of 
our  Constitution,  the  power  to  regulate  commerce  among  the 

275 


States,  limited  as  it  was  by  the  provision  that  by  such  regula- 
tion no  preference  should  be  given  to  ports  of  one  State  over 
those  of  another,  was  given  to  the  general  government  in  order 
to  insure  that  no  such  advantages  of  any  State  should  be  pressed 
to  the  disadvantage  of  the  Union  or  of  any  other  State.  And 
I  think  it  perfectly  clear  that,  in  its  effort  to  secure  just  and 
reasonable  interstate  rates  for  all  the  country,  without  prefer- 
ence to  the  ports  or  commerce  of  any  State  over  those  of  an- 
other, the  Federal  Government  may  employ  its  express  power 
to  regulate  commerce,  not  only  to  the  futile  end  of  making  the 
nominal  but  ineffective  interstate  rate,  but  also  to  the  efficient 
end  of  making  the  effective  and  controlling  local  rate. 

•  We  have  grown  accustomed,  by  long  acquiescence  in  its  use, 
to  yield  to  the  States  as  their  unquestioned  prerogative  the 
power  of  making  the  rates  for  transportation  from  point  to 
point  within  their  respective  boundaries.  But  the  long  exercise 
by  a  State  of  a  given  power  gives  no  prescriptive  rights  to  its 
continued  exercise  whenever  its  acts  on  the  subject  come  in 
conflict  with  a  law  of  the  Federal  Government  upon  the  same 
subject,  enacted  for  the  purpose  of  carrying  into  effect  an  ex- 
press Federal  power. 

HAVE    STATES   SOLE    POWER    OVER    RATES    WITHIN    THEIR 

BOUNDARIES? 

From  a  legal  standpoint  the  view  that  the  States  alone  may 
regulate  the  rates  for  interstate  transportation  is  based  upon 
the  statement  of  Mr.  Chief  Justice  Marshall  in  the  pioneer  case 
of  Gibbons  v.  Ogden,  that  "the  completely  internal  commerce 
of  a  State  may  be  considered  as  reserved  for  the  State  itself." 
But  the  interpretation  which  holds  that  the  words  "completely 
internal  commerce  of  a  State"  include  all  transportation  that  be- 
gins and  ends  within  the  State  overlooks  the  important  defini- 
tion which  Marshall  himself,  in  the  same  context,  gives  to  the 
terms.  He  defines  "completely  internal  commerce"  as  that 
"which  is  carried  on  between  man  and  man  in  a  State,  or  be- 
tween different  parts  of  the  same  State,  and  which  does  not  ex- 
tend to  or  affect  other  States/'  And  with  this  definition  in  mind 
he  says:  "The  genius  and  character  of  the  whole  government 
seem  to  be  that  its  action  is  to  be  applied  to  all  the  external 
concerns  of  the  nation,  and  to  those  internal  concerns  zvhich  af- 
fect the  States  generally;  but  not  to  those  zvhich  do  not  affect 

276 


other  States,  and  with  which  it  is  not  necessary  to  interfere,  for 
the  purpose  of  executing  some  of  the  general  powers  of  the  Gov- 
ernment." And  it  is  immediately  following  this  significant  lan- 
guage that  the  expression  is  found  upon  which  is  hung  the  en- 
tire argument  in  favor  of  the  exclusive  power  of  the  States  to 
regulate  intrastate  rates,  that  "the  completely  internal  commerce 
of  a  State,  then,  may  be  considered  as  reserved  for  the  State 
itself."  Plainly  the  "completely  internal  commerce"  thus  re- 
served was  that  already  carefully  described  as  that  "which  does 
not  extend  to  or  affect  other  States"  and  "with  which  it  is  not 
necessary  to  interfere  for  the  purpose  of  executing  some  of  the 
general  powers  of  the  Government."  Then,  speaking  generally 
of  local  laws,  such  as  "inspection  laws,  quarantine  laws,  health 
laws  of  every  description,  as  well  as  laws  for  regulating  the  in- 
ternal commerce  of  a  State"  Marshall  continues :  "No  direct 
general  power  over  these  objects  is  granted  to  Congress,  and, 
consequently,  they  remain  subject  to  State  legislation.  //  the 
legislative  power  of  the  Union  can  reach  them,  it  must  be  for 
national  purposes;  it  must  be  where  the  power  is  expressly  given 
for  a  special  purpose,  or  is  clearly  incidental  to  some  power 
which  is  expressly  given."  And  finally,  as  though  his  luminous 
mind  had  thrown  a  searchlight  upon  present  deplorable  condi- 
tions, he  concludes:  "It  is  obvious  that  the  Government  of  the 
Union,  in  the  exercise  of  its  express  powers,  that,  for  example, 
of  regulating  commerce  with  foreign  nations  and  among  the 
States,  may  use  means  that  may  also  be  employed  by  a  State,  in 
the  exercise  of  its  acknowledged  powers ;  that,  for  example,  of 
regulating  commerce  within  the  State." 

RATES    WITHIN    STATES    AFFECTING    INTERSTATE    COMMERCE 
SUBJECT  TO  NATIONAL  CONTROL. 

Now,  if  any  proposition  stands  out  as  demonstrated  by  the 
legislation,  the  litigation  and  the  discussion  of  the  past  twelve 
months,  it  is  that  the  commerce  regulated  by  State  rate-making 
and  other  enactments  does  "extend  to  or  affect  other  States," 
and  that  it  is  commerce  "with  which  it  is  necessary  to  interfere 
for  the  purpose  of  executing  (one)  of  the  general  powers  of  th«* 
Government,"  namely,  the  power  to  regulate  commerce  among 
the  States.  Politicians  may  not  admit  it,  but  the  business  in- 
terests of  the  country,  carriers  and  shippers  alike,  are  agreed 
that  the  great  menace   to   our  industry  lies  in   the  conflicting 

277 


regulations  of  differing  bodies  and  the  lack  of  a  comprehensive 
plan  of  regulation  with  sane  views  and  national  purposes. 

In  my  judgment,  the  language  I  have  quoted  from  the  great 
Chief  Justice  points  the  way  for  the  speedy  removal  of  that 
menace.  It  only  remains  for  Congress  to  say  that  the  same 
power  it  has  in  the  Hepburn  Act  conferred  upon  the  Interstate 
Commerce  Commission  for  the  revision  and  correction  of  inter- 
state rates  shall  be  extended,  under  like  conditions  and  re- 
strictions, to  the  revision  and  correction  of  local  rates  that  con- 
trol or  affect  the  interstate  rates. 

THE  CHAIRMAN:  We  should  like  to  have  the  ladies  and 
gentlemen  remain  with  us  a  little  while  longer.  The  gentleman 
who  will  address  us  now  wih  be  the  last  for  this  evenn  g.  I 
have  the  pleasure  of  introducing  to  you  Mr.  Allen  R.  Foote, 
of  Columbus,  Ohio,  who  will  address  this  conference  upon  the 
question  of  "Governmental  Regulation  of  Competitive  and 
Monopolistic  Corporations." 

Mr.  Allen  R.  Foote. 

Mr.  Chairman — No  general  question  of  governmental  policy 
occupies  at  this  time  so  prominent  a  place  in  the  thoughts  of  the 
people  as  that  of  properly  controlling,  without  unnecessarily 
checking,  the  growth  of  corporate  power. 

The  success  of  the  American  people  has  been  achieved  by 
permitting  and  inducing  individual  development  within  self- 
governed  political  and  industrial  organizations.  The  limit  of 
liberty  is  found  in  the  fundamental  requirement  that  every  per- 
son SHALL  EXERCISE  HIS  RIGHTS  WITH  A  DUE  REGARD  FOR  THE 
SIMILAR  RIGHTS  OF  OTHERS. 

With  self-governed  municipalities  within  self-governed  States, 
with  self-governed  States  within  a  self-governed  nation,  and 
with  self-governed  corporations  within  self-governed  trusts  or 
combinations,  the  people  of  the  United  States  hold  a  position 
of  commanding  political  and  industrial  influence  among  the 
powers  of  the  world  by  virtue  of  the  supreme  power  of  an  in- 
divisible political  union  and  indivisible  industrial  combinations. 

The  political  and  industrial  supremacy  of  America  cannot  be 
destroyed  except  by  an  unwise  exercise  of  political  power  by  its 
people  in  ill-advised  attempts  to  restrict  the  economic  organi- 
zation and  development  of  their  industries.    No  such  fate  awaits 

278 


us.  Discussions,  such  as  are  promoted  by  this  conference,  will 
bring  a  knowledge  of  the  truth  to  the  people.  When  the  peo- 
ple are  rightly  informed,  their  political  action  will  be  right. 
Such  action  will  aid,  instead  of  obstruct,  the  further  organiza- 
tion of  our  industries  on  lines  of  greatest  economic  efficiency 
until  combinations  reach  the  limit  of  economic  production  and 
management. 

The  tendency  to  combination  which  permeates  every  form  of 
human  activity,  political  and  industrial,  gives  evidence  of  an 
ever-increasing  strength  regardless  of  misinformed  denuncia- 
tion and  antagonistic  legislation,  State  and  national.  This  ten- 
dency is  the  result  of  the  outworking  force  of  a  natural  law 
against  which  obstructions,  interposed  by  fear,  are  powerless. 
Until  this  natural  law  is  recognized,  correctly  understood  and 
applied  in  the  solution  of  the  problem  under  consideration,  all 
efforts  to  correctly  regulate  and  utilize  its  force  will  be  made  in 
vain.  The  time  was  when  men  were  paralyzed  with  fear  in  the 
presence  of  a  vivid  display  of  uncontrolled  electrical  energy. 
Behold  what  is  being  accomplished  by  those  who,  by  studying 
natural  laws,  have  learned  how  to  comply  with  these  laws  in 
their  attempts  to  utilize  this  force.  Through  their  efforts  the 
force  that  once  paralyzed  men  with  fear  when  they  witnessed 
the  destruction  wrought  by  its  unbridled  energy  is  to-day  be- 
ing made  man's  most  helpful  and  obedient  servant.  Such  will 
be  the  result  of  an  intelligent  study  of  the  natural  law  of  com- 
petition and  monopoly. 

The  problem  of  to-day  is  the  correct  education  of  the  people 
so  that  they  will  understand  the  natural  law  that  forces  political 
and  industrial  combination,  and,  understanding  it,  will  know 
how  they  can  most  wisely  utilize  it  in  their  attempts  to  make 
such  combinations,  whether  small  or  great,  their  most  helpful 
and  obedient  servants. 

THE  NATURAL  LAW  OF  PROGRESS. 

All  truth  is  made  known  by  revelation  or  experience.  Each 
assimilated  truth  raises  mankind  to  a  higher  plane  of  moral 
and  economic  development.  Such  are  the  steps  by  which  the 
march  is  made  from  one  degree  of  progress  to  another.  Each 
individual  is  engaged  in  climbing  an  echelon  column  of  progress. 
His  progress  is  due  to  a  clearer  understanding,  a  more  perfect 
assimilation  of  truth  revealed  or  developed  by  experience,  He 


is  occupied  in  assimilating  the  mysteries  of  the  truths  involved 
in  the  step  of  progress  he  is  attempting  to  take.  Until  this  is 
accomplished  he  cannot  advance.  He  can  exert  no  uplifting 
influence  beyond  the  limits  of  his  intelligence.  This  renders  it 
impossible  for  those  in  a  low  degree  of  development  to  control 
those  above  them.  Each  echelon  in  the  column  of  progress  has 
laws  peculiar  to  itself.  It  has  its  own  standards  of  moral,  eco- 
nomic and  political  justice,  and  its  own  language.  Until  an  in- 
dividual has  learned  the  language  and  assimilated  the  truths  of 
the  step  of  progress  he  is  engaged  in  taking  he  cannot  acquire 
that  of  the  next.  The  actions  of  men  must  be  judged  by  the 
standards  of  the  echelon  of  progress  in  which  they  live  and 
work.     Moral  responsibility  is  limited  by  intelligence. 

The  social,  political  and  business  customs  and  laws  of  the 
times  and  communities  in  which  men  live  furnish  the  only  stand- 
ards by  which  the  character  of  their  conduct  can  be  justly  esti- 
mated. Only  those  whose  conduct  conforms  to  such  standards 
are  the  moral  and  upright  men  of  their  time  and  place.  They 
are  the  only  benefactors  of  their  day.  In  this  fact  is  found  an 
explanation  of  the  conflicting  estimates  of  conduct  held  by  those 
who  view  an  identical  action  from  different  planes  of  progress. 

German  and  English  standards  for  the  regulation  of  corpora- 
tions differ  from  those  which  political  speculators  are  seeking 
to  establish  in  this  country.  In  the  United  States  the  attempt 
is  being  made  to  deify  statutory  law  through  efforts  to  brand  as 
malefactors,  men  who  have  been  guilty  of  no  crime  other  than 
that  of  conforming  to  the  custom  of  their  time  and  place 

In  Germany  combinations  are  fostered  and  encouraged  by  the 
government.  In  England  the  government  does  not  interfere 
with  them  at  all.  An  act  which  is  a  crime  and  makes  a  man  an 
undesirable  citizen  in  the  United  States  makes  a  man  a  captain 
of  industry  and  gives  him  honor  on  the  other  side  of  the  ocean. 

Provisions  of  statutory  law  by  which  men  are  to  be  judged 
should  be  made  to  conform  to  the  requirements  of  moral  and 
economic  law.  They  should  not  be  changed  in  response  to  the 
requirements  of  party  expediency  or  the  political  ambition  of 
any  man.  Efforts  to  make  laws  just  should  not  be  less  sincere 
and  strenuous  than  efforts  to  enforce  obedience  to  laws.  The 
progress  of  civilization  is  due  to  refusals  to  obey  unjust  laws. 

Every  step  of  progress  achieved  by  mankind  has  been  taken 
by  changing  the  social,  political  and  business  customs  and  laws 

280 


which  furnish  the  standards  by  which  the  character  of  conduct 
is  estimated,  to  cause  them  to  conform  to  a  more  enlightened 
conception  of  the  requirements  of  justice.  As  a  result  of  ages 
spent  in  the  assimilation  of  truth,  revealed  or  developed  by 
experience ;  as  a  result  of  ages  spent  in  declaring  such  truths 
and  in  insistence  upon  their  application  to  the  actions  of  men 
by  the  churches  and  teachers  of  righteous  thought,  we  now  have 
a  conception  of  the  requirements  of  justice  greatly  different  from 
that  held  in  the  past,  even  so  recently  as  fifty  years  ago. 

THE  NATURAL  LAW  OF  COMPETITION. 

The  natural  law  of  competition  requires  the  unrestrained  use 
of  any  means,  within  the  limits  of  honesty,  that  will  aid  one 
competitor  to  wrest  a  business  profit  from  another.  The  suc- 
cess of  the  winning  competitor  is  measured  by  the  advantage 
gained. 

It  is  obvious  that  the  successful  competitor  will  be  the  one 
who  most  successfully  conceals  from  his  competitors,  or  from 
those  to  whom  he  seeks  to  sell  or  from  whom  he  seeks  to  buy, 
the  cost  of  his  products,  a  correct  knowledge  of  his  necessities, 
or  of  market  conditions.  Secrecy  in  the  management  of  a  com- 
petitive business  is  absolutely  necessary  to  success.  Exact 
knowledge  of  the  necessities  of  buyers  on  the  part  of  sellers,  or 
of  sellers  on  the  part  of  buyers,  would  be  fatal  to  success,  and 
would  operate  as  the  most  potent  restraint  upon  trade,  the  most 
powerful  agent  for  the  destruction  of  competition  than  can  be 
devised. 

Success  is  not  won  by  advertising  the  cost  of  products  or  the 
necessities  of  buyers  or  sellers.  The  right  and  the  power  to 
keep  secret  that  which  could  be  used  to  one's  disadvantage,  if 
known  to  his  competitors,  are  inalienable  safeguards  to  his  suc- 
cess. This  right  and  power  cannot  be  curtailed  in  any  way 
without  correspondingly  curtailing  the  power  of  competition 
and  the  chances  of  success  in  any  competitive  business. 

Secrecy  and  absolute  freedom  in  management  are  funda- 
mental requirements  for  effective  competition.  Through  all  the 
past,  "Let  the  buyer  beware,"  has  been  the  ethical  standard  of 
competitive  selling.  In  that  degree  of  development  a  gain  made 
by  lying  was  classed  as  legitimate.  We  are  now  entering  a  de- 
gree of  development  in  which  gains  made  by  lying  will  be 
classed  with  gains  made  by  stealing.     Both  will  be  branded  as 

281 


criminal.  We  know  the  suppression  of  stealing,  so  far  as  it 
has  been  successfully  done,  has  been  of  enormous  moral  and 
economic  advantage,  a  contribution  to  the  general  welfare  of 
incalculable  value.  Still  greater  will  be  the  benefits  derivable 
from  the  suppression  of  lying.  Progress  in  this  direction  is 
slow,  but  ever  moving  in  the  right  direction.  The  day  is  not 
far  distant  when  those  who  seek  gains  by  lying  will  be  ruled  out 
of  social  and  business  circles  as  promptly  and  effectively  as  are 
those  convicted  of  making  gains  by  stealing.  Within  the  limits 
of  honest  dealing  no  restraint  upon  competitive  corporations 
is  necessary  or  desirable. 

The  functions  of  government  are  to  prevent  and  punish 
fraud,  to  safeguard  individual  freedom,  and  to  enforce  freely- 
made  contracts.  The  only  limit  upon  the  organization  of  labor 
and  of  capital  should  be  a  prohibition  of  interference  with  the 
similar  rights  of  others. 

Consumers  depend  upon  the  regulative  power  of  free  com- 
petition to  secure  competitive  commodities  at  an  economic  sell- 
ing price,  a  price  that  will  yield  the  seller  only  a  reasonable 
profit.  The  best  results  for  consumers  are  obtained  by  induc- 
ing the  largest  possible  number  of  competitors,  or  competitors 
best  equipped  for  economic  production,  to  enter  into  competi- 
tion with  each  other  in  an  absolutely  free  market.  A  com- 
petitive price  can  be  determined  only  by  free  competition  in  a 
free  market. 

Rebates,  bonuses,  discounts,  commissions  and  special  terms 
and  favors  of  every  kind  are  the  natural  weapons  of  competi- 
tion, which  every  competing  seller  must  be  free  to  use  at  his 
own  discretion  in  his  efforts  to  win  trade  from  others.  The 
fixing  of  prices  for  competitive  commodities  by  governmental 
regulation  would  be  an  intolerable  interference  with  the  natural 
law  of  competition.    It  would  destroy  competition. 

For  competitive  industries,  governmental  regulation  must 
undertake  to  enforce  honesty  in  representations  as  to  the  qual- 
ity and  quantity  of  commodities  offered  for  sale.  Gains  secured 
by  lying  must  be  prohibited  as  effectively  as  gains  secured  by 
stealing.  The  enforcement  of  proper  governmental  regulation 
of  competitive  industries  requires  only  an  inspection  of  the  com- 
modities offered  for  sale  to  insure  buyers  that  they  are  as  rep- 
resented. 

Free  and  honest  competition  is  the  true  safeguard  of  the  gen- 

282 


eral  welfare  in  all  competitive  industries.  Competition  cannot 
exist  between  those  from  whom  nothing  is  concealed.  With  an 
exact  knowledge  of  each  other's  condition,  those  who  otherwise 
would  be  competitors  will  not  compete.  They  will  combine  for 
mutual  benefit  and  profit.  Active  competition  is  impossible 
where  profitable  combination  is  possible.  Competition  and  pub- 
licity are  incompatible. 

THE  NATURAL  LAW  OF  MONOPOLY. 

Monopoly  is  the  antithesis  of  competition.  Publicity  will  kill 
competition,  it  is  indispensable  to  an  effective  monopoly.  Users 
must  depend  upon  the  power  of  governmental  regulation  to 
secure  monopolistic  services  at  an  economic  selling  price,  a 
price  that  will  yield  the  seller  only  a  reasonable  profit.  The 
price  should  be  determined  by  the  seller,  subject  to  review  as 
to  its  reasonableness,  by  governmental  commissions  and  the 
courts.  The  best  results  for  users  of  monopolistic  services  are 
obtained  by  prohibiting  competition  within  a  territory  that  can 
be  served  by  one  corporation,  and  the  making  of  uniform  rates 
by  traffic  associations  at  all  central  points  served  by  two  or  more 
public  service  corporations. 

The  fixing  of  rates  that  shall  be  uniform  to  all  users  taking 
service  under  similar  conditions  at  the  same  time  is  a  correct  ap- 
plication of  the  economic  law  of  monopoly  which  must  be  en- 
forced by  governmental  regulation  whenever  and  wherever  public 
service  corporation  managers  fail  to  do  so.  Uniform  rates,  and 
the  prohibition  of  rebates,  bonuses,  discounts,  commissions  and 
special  terms  or  favors,  are  the  natural  weapons  of  monopoly, 
which  every  public  service  corporation  manager  must  insist 
upon  using  within  his  own  territory,  and  in  combination  with 
others  at  all  so-called  competing  points,  in  his  efforts  to  render 
the  best  possible  service  at  the  lowest  economic  rates  to  all 
users. 

Governmental  regulation  must  undertake  to  enforce  honesty 
in  requiring  all  users  to  pay  identical  rates  for  service  of  the 
same  character  rendered  at  the  same  point  on  the  same  date. 
The  power  of  monopoly  must  be  used  to  establish,  not  to  de- 
stroy, equality  of  opportunity. 

The  enforcement  of  proper  governmental  regulation  of  all 
services  rendered  by  public  service  utilities,  however  owned  and 
operated,  requires  an  inspection  and  publicity  of  accounts  to  as- 

283 


sure  all  users  that  equality  of  opportunity  is  established  by  the 
approved  rates  and  rules  to  which  they  are  required  to  con- 
form. 

Uniform  rates  and  rules,  honestly  enforced,  are  the  true  safe- 
guards for  the  general  welfare  in  all  monopolistic  industries. 

Attempts  to  establish  competition  in  the  business  of  public 
service  utilities  are  as  unnatural  and  harmful  restraints  upon 
industrial  development  as  are  attempts  to  establish  monopolies 
in  the  production  and  sale  of  the  commodities  of  commerce. 

All  evils  exposed  by  the  investigations  of  the  Public  Utilities 
Commission  in  New  York  City  are  the  direct  results  of  the  un- 
wise public  policy  of  granting  short-term  franchises  to  com- 
peting public  service  corporations  and  the  failure  to  require 
publicity  of  accounting  as  a  fundamental  safeguard  for  the  pub- 
lic and  individual  interests  of  the  people  in  every  franchise 
granted.  Every  competing  franchise  induces  a  merger.  Every 
merger  gives  opportunity  for  over-capitalization. 

All  complaints  preferred  against  public  service  corporations 
throughout  the  country  are  the  inevitable  result  of  a  public 
policy  that  has  denied  public  service  corporations  the  protection 
from  competition  required  by  the  natural  law  of  monopoly,  and 
attempts  to  enforce  a  prohibition  against  mergers  and  rate 
agreements  without  which  there  can  be  no  governmental  regu- 
lation of  rates.  The  fixing  of  a  uniform  rate  by  the  Interstate 
Commerce  Commission,  for  an  identical  service  rendered  be- 
tween two  points  by  two  or  more  public  service  corporations, 
and  the  requirements  that  such  rate  shall  be  enforced  against 
all  shippers,  as  required  by  recent  legislation,  is  precisely  the 
kind  of  agreement  which  public  service  corporations  have  been 
prohibited  from  making  for  themselves  by  a  construction  of  the 
so-called  Sherman  Anti-Trust  Law. 

COMPETITIVE   INDUSTRIAL  CORPORATIONS   SHOULD   BE  REGU- 
LATED  BY   THE  SHERMAN   ANTI-TRUST  LAW.     PUBLIC 
SERVICE  CORPORATIONS  SHOULD  BE  REGULATED 
BY  THE  INTERSTATE  COMMERCE  LAW. 

An  intelligent  recognition  of  the  Natural  law  of  Competition 
and  the  Natural  law  of  Monopoly  will  demonstrate  the  fact  that 
competitive  industrial  corporations  and  public  service  corpora- 
tions cannot  be  effectively  regulated  by  the  same  methods  under 
laws  applicable  to  both. 

284 


The  Sherman  Anti-Trust  Law  and  the  Interstate  Commerce 
Law  have  been  disappointments  because  they  do  not  draw 
proper  lines  of  demarcation  between  corporations  that  are  by 
nature  organically  opposite  in  character.  By  reason  of  this 
fact,  there  is  a  failure  to  recognize  and  properly  apply  in  these 
laws  the  fundamental  requirements  of  the  natural  laws  of  com- 
petition and  monopoly. 

The  Sherman  Anti-Trust  Law  should  be  amended  to  exclude 
public  service  corporations  from  its  operation  and  to  permit 
reasonable  trade  agreements  under  the  supervision  of  the  De- 
partment of  Commerce  and  Labor. 

The  Interstate  Commerce  Law  should  be  amended  to  exclude 
industrial  competitive  corporations  from  its  operation,  and  so 
as  to  permit  reasonable  traffic  agreements  under  the  supervision 
of  the  Interstate  Commerce  Commission,  in  order  to  secure 
uniformity  of  rates,  rules  and  methods  of  operation. 

A  sane  and  safe  plan  of  action  is  impossible  unless  it  is  based 
upon  a  sane  and  safe  principle.  All  plans  must  be  based  prim- 
arily upon  a  recognition  of  the  human  element  involved.  Those 
who  are  affected  by  a  regulation  must  be  satisfied  that  it  is  just, 
and  their  sense  of  justice  must  be  strong  enough  to  control  their 
greed  for  gain  or  lust  for  power,  or  they  will  feel  no  moral  obli- 
gation to  obey  it. 

A  solution  of  the  problem  of  the  proper  regulation  of  trusts 
and  combinations  must  be  sought  in  a  more  intelligent  recogni- 
tion and  application  of  the  moral  law  which  teaches  honesty  as 
a  principle  and  of  the  economic  law  which  requires  the  enforce- 
ment of  honesty  as  a  practice. 

I  have  gathered  from  remarks  made  to-day  a  new  war  cry.  In 
1776  the  war  cry  was,  "No  taxation  without  representation." 
Mr.  Seligman  made  some  statements  to-day  which  have  led  me  to 
formulate  a  new  war  cry:  "There  is  no  responsibility  without 
compensation." 

Mr.  Chairman,  I  now  desire  to  offer  the  following  resolution : 

Resolved,  That  we  recommend  the  Congress  of  the  United 
States  to  amend  the  Sherman  Anti-Trust  Law  to  exclude  pub- 
lic service  corporations  from  its  operation,  and  to  permit  rea- 
sonable trade  agreements  between  individuals,  firms  and  in- 
dustrial companies  engaged  in  competitive  business,  subject  to 
the  approval  of  the  Department  of  Commerce  and  Labor;  and 
to  amend  the  Interstate  Commerce  Law  to  exclude  competitive 

285 


industrial  corporations  from  its  operation,  and  to  permit  rea- 
sonable traffic  agreements  subject  to  the  approval  of  the  Inter- 
state Commerce  Commission,  in  order  to  secure  uniformity  in 
rates,  rules  and  methods  of  operation. 

THE  CHAIRMAN:  The  resolution  will  be  referred  to  the 
Committee  on  Resolutions.  Do  any  others  desire  to  introduce 
resolutions  ? 

A  DELEGATE:  I  would  like  to  offer  a  resolution  bearing 
on  the  addresses  of  the  evening,  and  in  harmony  with  the  one 
just  introduced. 

Whereas,  The  Sherman  Act  prohibits  all  agreements  in  re- 
straint of  trade,  and  the  statutes  of  many  States  place  similar 
restrictions  upon  such  agreements  within  those  States;  and 

Whereas,  Some  agreements  in  restraint  of  trade  are  beneficial 
in  their  purpose  and  effect ;  now  therefore  be  it 

Resolved,  That  this  conference  recommends  to  Congress  in 
behalf  of  interstate  commerce,  and  to  the  legislatures  of  the 
several  States  in  behalf  of  intra-state  commerce,  that  the  laws 
be  so  amended  as  to  permit,  under  proper  restrictions,  the  for- 
mation of  agreements  for  the  purpose  of  maintaining  reason- 
ably profitable  prices  for  the  products  of  manufacture,  mining, 
agriculture  and  labor,  the  purpose  and  terms  of  such  agree- 
ments to  be  expressly  stated  and  made  public,  and  prior  to  their 
taking  effect  to  be  submitted  to  and  approved  by  the  Depart- 
ment of  Commerce  and  Labor;  provided,  that  associations  and 
individuals  parties  to  such  agreements  shall  be  held  individually 
and  collectively  responsible  for  the  proper  exercise  of  the  priv- 
ilege thus  extended;  failing  this,  they  should  be  subject  to  the 
penalties  hitherto  provided;  and  further  provided,  that  no  mo- 
nopoly of  any  natural  resources  shall  thereby  be  created. 

THE  CHAIRMAN:  The  resolution  will  be  referred  to  the 
Committee  on  Resolutions. 

The  conference  then  adjourned  until  10:30  the  following  day. 


286 


Seventh  Session,  October  24,  10:30  A.  M. 

The  conference  was  called  to  order  by  Mr.  Marcus  M.  Marks 
at  10:30  A.  M. 

THE  CHAIRMAN :  In  accordance  with  the  notice  given  by 
the  Committee  on  Resolutions  yesterday,  this  morning  will  be 
the  last  opportunity  for  the  presentation  of-  resolutions,  and  it 
will,  perhaps,  be  well  to  give  you  the  opportunity  for  the  pres- 
entation of  resolutions  now,  and  again  at  the  close  of  the  ses- 
sion.    Are  there  any  resolutions  to  be  presented  at  this  time? 

MR.  JOHN  W.  TOMLINSON  (Alabama)  :  Mr.  Chairman, 
I  have  a  resolution  which  I  desire  to  go  to  the  Committee  on 
Resolutions  in  the  regular  way,  of  which  committee  I  am  a  mem- 
ber, and  I  shall  read  the  resolution. 

Be  It  Resolved,  That  it  is  the  sense  of  this  conference  that 
both  Federal  and  State  authority  shall  be  invoked  in  the  solu- 
tion of  the  trust  and  transportation  problems  without  attempt- 
ing to  supersede  or  abridge  either  jurisdiction,  under  the  Con- 
stitution ;  and  that,  when  deemed  advisable  to  change  our  or- 
ganic law  in  regard  to  these  matters,  it  shall  be  done  by  getting 
the  consent  of  the  people  in  the  manner  prescribed  in  the  Con- 
stitution itself. 

THE  CHAIRMAN:  Gentlemen,  the  trouble  in  New  York 
has  been  largely  an  excess  of  paper,  and  our  Committee  on  Pro- 
gram, having  decided  that  there  is  some  danger  of  the  same 
thing  occurring  in  this  convention — excess  of  papers — the  gen- 
tlemen who  are  to  speak  to-day  have  consented  to  address  you 
instead  of  reading  to  you.  The  time  has  been  arranged  in  this 
way:  There  will  be  four  speakers,  the  last  of  whom  is  Mr. 
Herman  Ridder,  who  will  have  twenty  minutes  each,  and  that 
twenty  minutes  will  be  decided  in  a  business-like  way.  The  slow 
clock  has  been  removed  and  a  fast  watch  has  been  substituted. 
The  floor  will  be  thrown  open  for  discussion  from  the  business 
organizations  upon  their  relation  to  this  question.    The  business 


men  have  been  very  modest,  although  this  is  entirely  a  business 
question ;  they  have  been  very  glad  to  allow  the  educators  to 
explain  and  to  teach,  but  they  have  been  called  forth  from  their 
modest  situation  and  urged  to  come  on  and  say  a  few  words 
from  the  practical  standpoint,  giving  their  ideas  of  the  problems. 
They  will  discuss  the  question  of  the  evils  and  the  benefits  of 
trusts  and  combinations,  how  to  eradicate  the  evils  and  at  the 
same  time  conserve  the  benefits.  I  may  say  that  to-day  will  be 
the  day  for  commerce  and  labor — the  morning  will  be  devoted 
to  commerce  and  the  afternoon  to  labor.  The  committee  has 
decided  to  hold  the  speakers  down  to  time,  and  as  I  am  not  a 
candidate  for  any  office  I  have  accepted  this  task.  It  is  quite 
appropriate  to  tell  you  that  at  4  o'clock  this  afternoon  the  speech- 
making  will  end,  as  far  as  set  speeches  go,  and  all  that  are 
brought  in  after  that  time  will  be  simply  handed  in  for  printing. 
There  will  be  a  stenographic  report  of  this  congress,  printed  in 
full,  and  every  paper  that  is  not  read  will  be  printed,  so  that  the 
public  will  know  what  is  intended.  Being  a  day  for  commerce 
and  labor,  it  is  quite  appropriate  that  the  first  speaker  shall  be 
the  representative  of  the  Department  of  Commerce  and  Labor, 
the  Commissioner  of  Corporations  from  Washington,  the  Hon. 
Herbert  Knox  Smith,  who  will  speak  on  "Administrative  Regu- 
lation of  Corporations." 

Hon.  Herbert  Knox  Smith. 

Mr.  Chairman — I  wish  to  present  for  your  consideration  cer- 
tain suggestions  of  a  constructive  nature  for  the  systematic  reg- 
ulation of  corporations;  in  particular,  to  suggest  the  need  of  a 
positive  and  effective  system  for  the  supervision  of  corporations, 
through  the  medium  of  a  specialized  administrative  office  organ- 
ized for  that  purpose.  In  speaking  of  the  need  of  such  super- 
vision, I  have  especially  in  mind  the  so-called  industrial  cor- 
porations. 

Allow  me,  therefore  to  note  the  need  for  such  a  system, 
the  reason  for  it,  the  way  in  which  it  should  work,  and  some 
of  the  results  that  might  reasonably  be  expected  from  it. 

First,  as  to  the  need  of  such  supervision.  The  corporation 
is,  of  course,  an  absolute  essential  for  the  carrying  on  of  modern 

288 


business.  We  must  remember,  however,  that  this  condition  is 
comparatively  new;  that  only  within  the  last  iifty  years  has  our 
commercial  progress  been  such  as  to  bring  the  corporation  to 
the  front  as  a  business  fact.  The  result  of  this  sudden  demand 
for  the  corporate  form  has  been  a  very  hasty  development  of 
corporation  law,  as  compared  with  the  slow  and  normal  growth 
of  our  common  law.  Consequently,  our  corporation  law  is  in 
an  unfinished  and  ill-balanced  state,  and  as  a  piece  of  machinery 
for  the  direction  of  our  great  industrial  forces  it  is  in  a  highly 
unsatisfactory  condition. 

DUTY  OF  GOVERNMENTS  TO  REGULATE  CORPORATIONS. 

The  community  has  created  corporations,  and,  of  course, 
has  power  to  regulate  them.  It  is,  in  fact,  our  duty  to  do  so, 
because  we  have  given  to  these  artificial  creatures  certain  great 
rights  and  exemptions  which  do  not  belong  to  the  individual, 
for  the  abuse  of  which  we,  therefore,  are  responsible.  A  cor- 
poration has  permanent  existence,  which  gives  an  effective 
continuity  of  policy;  indefinite  divisibility  of  property  interests, 
which  allows  of  the  concentration  of  great  masses  of  capital; 
a  highly  centralized  internal  control,  and,  finally,  the  limited 
liability  of  the  stockholder.  These  exceptional  powers,  when 
applied  to  modern  industry,  produce  far-reaching  commercial 
results.    Their  abuse  affects  our  entire  national  life. 

They  result  in  a  concentration  of  enormous  industrial  power 
in  the  hands  of  the  corporate  manager.  They  result,  on  the  other 
hand,  in  decreasing  his  personal  responsibility.  One  man  may 
be  in  absolute  practical  control  of  a  great  corporation,  and  at 
the  same  time  his  own  financial  interest  therein  may  be  insig- 
nificant. His  responsibility  may  be  so  wholly  incommensurate 
with  his  power  as  to  leave  him  practically  irresponsible.  The 
community  is  responsible  for  the  existence  of  those  peculiar 
powers  that  have  led  to  such  results.  Having  created,  we 
must  control. 

Now,  what  do  wre  want  this  corporation  to  accomplish?  We 
demand  certain  things  of  our  industrial  machinery — efficiency 
in  business,  equity  in  its  various  relationships,  a  reasonable 
return  for  services  rendered,  the  maintenance  of  equal  com- 
mercial opportunity,  and  the  furnishing  of  complete  information 
to  all  concerned,  so  that  we  may  know  that  this  machinery  is 

289 


accomplishing  what  we  demand  of  it.     The  question  is,  how  to 
get  these  things. 

ANTI-TRUST  LAWS  A  MISTAKEN  POLICY. 

Our  most  conspicuous  attempts  so  far  at  the  solution  of 
this  general  question  have  chiefly  taken  the  shape  of  laws  pro- 
hibiting combination,  the  so-called  "anti-trust"  laws.  These 
laws  forbid,  in  substance,  combination  in  restraint  of  trade. 
Inasmuch  as  it  is  hard  to  conceive  of  any  sort  of  important 
combination  which  does  not  to  a  certain  extent  reduce  com- 
petition, and  thereby  in  the  technical  legal  sense  restrain  trade, 
it  may  be  generally  said  that  the  anti-trust  laws  forbid  industrial 
combination. 

These  "anti-trust"  laws  have  covered  a  transition  period 
in  our  policy.  They  have  turned  public  attention  to  the  general 
questions,  and  have  in  certain  instances  accomplished  economic 
good.  But  it  can  hardly  be  claimed  that  they  have  proved  ade- 
quate as  a  general  and  practical  regulation  of  corporations.  They 
have  been  very  difficult  of  enforcement.  The  tremendous  ten- 
dency toward  concentration  has  been  too  strong  for  them. 

We  might  as  well  recognize  the  fact  that  industrial  and 
corporate  combination  is  an  economic  necessity ;  that  it  is  not 
only  a  necessity,  but  also  an  accomplished  fact.  We  must  admit 
the  situation,  and  adapt  ourselves  to  it.  If  then,  this  be  true, 
the  real  matter  to  be  considered  is  not  the  fact  that  combination 
power  exists,  but  the  question  how  that  power  is  used.  It  is 
not  the  existence,  but  the  misuse,  of  industrial  power,  that  is 
the  significant  consideration. 

Some  corporate  managers  use  their  power  justly,  some  un- 
justly. 

It  is  the  difference  in  this  use  that  makes  the  problem. 
Certain  concerns  use  their  power  to  increase  their  own  effici- 
ency. They  maintain  their  hold  on  their  business  simply  because 
they  give  better  service  or  lower  prices.  This  is  a  proper  use 
of  power.  On  the  other  hand,  certain  concerns  try  to  cripple 
the  efficiency  of  competitors  by  unfair  methods  of  competition. 
They  induce  railways,  which  are  public  agencies,  to  give  them 
private  discriminations;  they  suborn  competitors'  employes; 
they  institute  oppressive  litigation.  They  misuse  their  commer- 
cial power. 

The   one   acquires   and   maintains    its   power   by   giving   the 

2Q0 


best  service ;  the  other,  by  preventing  any  one  else  from  giving 
service. 

ADMINISTRATIVE  REGULATION  NEEDED. 

Suppose,  therefore,  that  we  give  our  attention  to  this,  the 
real  issue.  Suppose  that  we  allow  combination,  and  see  that 
the  centralized  power  which  it  creates  is  properly  used.  If  we 
are  to  do  this,  we  must  have  some  efficient  system  of  regulation, 
by  permanent  supervision.  Such  a  control  must  be  active  and 
positive,  not  negative.  It  cannot  be  accomplished  by  simple 
prohibition  or  by  the  piling  up  of  penal  statutes.  Our  industrial 
machinery  is  so  infinitely  complex  that  it  cannot  be  adjusted  by 
the  remote,  inflexible,  occasional  remedy  of  judicial  procedure. 
It  must  be  regulated  by  close  administrative  supervision  on  the 
part  of  the  Government,  not  by  the  process  of  the  court. 

In  fact,  even  in  the  proper  field  of  prohibitive  statutes,  wc 
are  beginning  to  see  by  experience  that  the  established  pro- 
cedure, with  its  strict  construction  of  penal  laws,  which  suffices 
in  the  case  of  the  elementary  crimes  of  murder  and  burglary,  is 
helpless  in  the  face  of  modern  industrial  crimes  and  misde- 
meanors. For  instance,  I  do  not  believe  any  statute  could  be 
drawn  which  will  of  itself  cover  all  forms  of  railway  rebates. 

We  are  finding  that  administrative  supervision  must  help 
out  judicial  procedure  even  in  such  criminal  matters.  We  have 
to  have  our  Commissions  and  our  Bureaus  in  order  to  make 
of  any  effect  prohibitive  statutes  against  commercial  crimes, 
no  matter  how  minute,  how  apparently  complete  those  statutes 
are.      , 

The  English  Companies  Act  is  often  referred  to  as  a  model, 
especially  in  its  sweeping  requirements  that  the  promoter  of 
a  corporation  shall  file  copies  of  all  contracts  which  are  to  bind 
the  new  corporation.  I  have  just  inspected  a  set  of  documents 
recently  so  filed  by  a  promoter  in  London.  They  cover  thirty 
pages  of  the  finest  print.  I  defy  any  man  to  spend  a  day  on 
them,  and  have  at  the  end  of  that  time  the  faintest  idea  of  the 
real  liabilities  and  rights  which  they  purport  to  describe.  These 
documents  were  deliberately  and  successfully  framed  to  nullify 
the  law. 

We  must  meet  business  organization  with  business  organ- 
ization, not  with  the  mere  fiat  of  statute,  left  to  enforce  itself 
unsupported. 

291 


In  short,  in  dealing  with  this  whole  matter  of  industrial  con- 
centration, we  have  the  choice  of  two  alternatives.  We  may 
either  prohibit  or  regulate  combinations.  But  the  two  are 
absolutely  inconsistent;  we  cannot  do  both  at  the  same  time. 
To  my  mind  regulation  is  the  only  choice.  Regulation  by  an 
administrative  office  exercising  supervision  over  corporate 
operations,  accompanied  by  wide  publicity,  and  backed  up  by 
criminal  penalties  directed  at  unfair  methods  of  competition,  by 
prohibition  only  where  supervision  fails.  It  is  the  only  system 
which  has  the  flexibility  and  efficiency  needed  to  deal  with  the 
great  and  complex  operation  of  large  corporations. 

The  anti-trust  laws  are  wholly  unsuited  to  accomplish  any 
such  results.  They  are  negative  and  prohibitive.  They  con- 
demn all  combination,  whether  beneficial  or  harmful.  They  are 
enforced  only  by  Courts.  They  also  forbid  necessarily  any 
co-operation  between  the  Government  and  corporate  interests, 
because  the  anti-trust  laws  are  an  attack  on  corporate  existence 
itself,  and  inevitably  place  corporate  managers  in  opposition  in 
spite  of  themselves. 

SCOPE  AND   FUNCTION  OF  ADMINISTRATIVE  REGULATION. 

I  believe  that  these  considerations  show  the  need  of  a  pos- 
itive system.  To  make  it  tangible,  let  me  suggest  concrete 
details.  Establish,  say,  a  simple  system  of  regulation  by  super- 
vision. Provide  a  government  office  to  administer  it.  Require 
that  all  large  corporations  doing  a  certain  gross  amount  of  busi- 
ness a  year  shall  make  reports  to  that  office ;  make  their  accounts 
subject  to  inspection  at  will  by  that  office ;  provide  for  publi- 
cation by  that  office,  in  concise  form,  of  all  the  facts  in  regard 
to  such  corporations  which  are  of  public  interest,  safeguarding 
all  proper  business  secrets.  Provide  also  for  that  protection 
of  law-abiding  corporations  that  is  the  correlative  of  regulation. 

The  suggestion  is  tentative.  I  do  not  pretend  to  say  just 
how  it  would  work.  But  it  has  certain  important  possibilities, 
any  one  of  which  would  justify  the  change.  It  will  give  infor- 
mation;  that  result  alone  would  justify  the  whole  system.  If 
there  is  any  one  kind  of  information  which  the  citizen  has  a 
right  to  demand  from  his  Government,  it  is  information  as  to 
the  great  interstate  corporations.  They  are  handling  the 
dominant  forces  of  the  century ;  their  operations  affect  directly 
the  lives  of  nearly  all  of  us.    Their  legal  and  business  conditions 

292 


are  far  too  complex  and  many  sided  to  be  grasped  by  the 
average  citizen  with  his  present  means  of  information.  And 
yet  the  political  theory  of  our  institutions  requires  that  he  should 
understand  and  act  intelligently  on  current  questions,  involving 
details  of  capitalization,  prices,  profits,  markets  and  transporta- 
tion. 

These  facts,  which  he  cannot  get  now,  which  he  must  have, 
and  which  may  put  an  entirely  new  face  on  the  national  view 
of  corporate  activity,  will  be  provided  for  him  by  such  a  system 
of  supervision  and  publication. 

Again,  such  a  system  will,  to  a  certain  extent,  react  and  pre- 
vent wrongs  that  cannot  be  reached  by  statute,  because,  as 
every  one  knows,  the  penal  law,  which  can  exercise  no  discretion, 
leaves  now  untouched  a  broad  zone  of  transactions  which  never- 
theless all  admit  to  be  unfair  and  inequitable.  They  can  only 
be  reached  by  the  condemnation  of  the  public. 

BENEFITS  OF  PUBLICITY. 

Supervision  and  publicity  will  also  prevent  wrong  before- 
hand, and  prevention  is  far  better  than  punishment.  The  mere 
knowledge  that  a  governmental  agency  has  the  right  at  any  time 
to  investigate  the  operations  of  a  corporation,  and  will  surely 
make  public  improper  transactions,  will  often  prevent  the  incep- 
tion of  such  transactions.  That  corporate  manager  is  rare  who 
has  the  nerve  to  continue  wrong  practices  which  have  been 
authoritatively  exposed  to  the  public  by  specific  facts  of  time, 
place,  person  and  amount. 

I  am  not  talking  on  theory.  The  thing  has  been  convinc- 
ingly done.  For  example,  the  report  of  my  predecessor  in  office, 
Mr.  Garfield,  the  Commissioner  of  Corporations,  in  May,  1906, 
set  forth,  with  just  such  specific  detail,  an  extensive  system  of 
railway  discriminations.  Some  of  them  were  criticised  as  illegal, 
and  others,  not  as  illegal,  but  as  unfair.  Immediately  the  rail- 
roads canceled  every  illegal  rate  criticised  in  that  Report,  as  well 
as  many  of  those  which,  while  legal,  were  yet  inequitable. 

Nor  was  this  done  to  avoid  prosecution,  because  the  criminal 
liabilities  had  already  accrued.  Furthermore,  the  railroads  can- 
celed rates  which  were  admittedly  legal,  though  unfair.  This 
example  shows  the  efficiency  of  publicity.  Not  a  single  court 
process  had  been  issued.  Now,  suppose  the  attack  had  been 
made  solely  through  the  courts.     One  or  two  cases  only  would 

293 


have  been  tried ;  they  would  have  been  contested  up  to  the  court 
of  last  resort,  with  two  or  three  years  delay,  might  readily  have 
been  lost  by  technicalities,  and  meantime  the  original  rebate 
system  itself  would  have  been  continued  with  hardly  a  jar.  Con- 
trast this  meagre  result  with  the  instantaneous  and  sweeping 
effect  of  simple  publication. 

The  unfair  methods  that  are  now  prohibited  by  law,  such  as 
railway  discriminations,  will  be  exposed  by  such  supervision, 
and  taken  care  of  by  the  courts. 

A  further  class  of  unfair  methods  of  competition  will  be  met 
by  additional  penal  laws  where  our  increased  information  shall 
show  that  legislation  is  reasonably  applicable. 

Still  others  will  be  conducted  effectively  by  public  opinion  as 
they  are  exposed  from  time  to  time. 

There  would  be  a  greatly  increased  soundness  of  the  indus- 
trial situation.  Confidence,  upon  which  prosperity  largely  de- 
pends, can  be  permanent  only  when  placed  on  a  basis  of  com- 
plete information. 

SUPERVISION   PROMOTES   MUTUAL  UNDERSTANDING. 

The  regulating  authority,  on  the  one  hand,  and  the  masters 
of  industry  on  the  other,  would  be  brought  together  in  the  exer- 
cise of  the  supervisory  powers  on  the  ground  of  conference,  in 
a  flexible  system  which  allows  of  mutual  adjustment  through 
mutual  enlightenment,  so  that  the  two  points  of  view — that  of 
the  Government  official  who  has  in  mind  the  public  interest,  and 
that  of  the  corporate  manager,  who  has  in  mind  commercial 
success,  shall  be  made  to  approximate.  From  the  contact  of 
these  two  points  of  view  through  the  medium  of  such  adminis- 
trative office,  there  would  certainly  come  two  things — informa- 
tion for  the  public,  and  better  understanding  between  the  Gov- 
ernment and  the  corporate  managers.  Both  of  these  are  abso- 
lutely essential  for  any  handling  of  this  great  and  complex 
problem.  I  would  rather  have  an  added  ounce  of  mutual  un- 
derstanding than  a  ton  of  criminal  penalties. 

It  is  not,  in  short,  too  much  to  hope  that  there  will  arise 
some  co-operation  between  the  Government,  charged  with  the 
public  welfare,  and  corporate  managers  who  control  forces  so 
large  as  to  be  governmental  in  their  scope,  and  public  interest. 
We  may  thus  see  an  increasing"  abandonment  of  the  old  theory 
that  industrial  and  corporate  matters  arc  wholly  private  affairs, 

294 


and  the  rise  of  the  modern  ideal  that  the  possession  of  great 
commercial  power  is  largely  affected  by  a  public  trust.  And  in 
all  these  possibilities  lies  the  greatest  of  all  possibilities,  that  both 
the  public  and  the  captains  of  industry  will  grow  toward  the 
establishment  of  those  higher  standards  of  business  morals  that 
must  be  created  if  our  commercial  prosperity  is  to  be  permanent. 

Such  results  have  already  arisen  in  the  fields  where  the  Gov- 
ernment and  business  interests  have  come  in  contact.  The 
Department  of  Commerce  and  Labor  regulates  very  extensively 
the  construction,  equipment  and  operation  of  steamboats.  These 
regulations  are  made  only  after  the  fullest  consultation  with 
shipping  interests,  and  these  interests  have  in  most  cases  grown 
to  be  almost  as  keen  as  the  Government  in  providing  safeguards 
for  water  traffic.  On  the  other  hand  the  Government  officers, 
by  this  constant  consultation  with  traffic  men  have  avoided 
many  serious  practical  errors. 

The  National  Bank  system,  with  its  constant  governmental 
supervision,  is  another  example  of  the  effectiveness  of  such  ad- 
ministrative action. 

The  experience  of  the  Bureau  of  Corporations,  in  its  con- 
stant contact  with  corporate  managers,  has  revealed  surprising 
possibilities  of  such  co-operation,  in  the  improvement  of  busi- 
ness methods. 

Make  it  possible  to  get  some  of  these  results.  Force  the 
Government  and  the  corporations  on  to  some  common  ground 
where  they  must  meet  constantly  in  practical  contact.  Give  the 
two  sides  of  the  question  an  ordinary,  common-sense  chance  to 
talk  it  over,  to  settle  it  out  of  court,  without  being  forced  into 
continuous  opposition,  and  human  nature  will  work  out  the 
matter  here  as  it  already  has  in  those  relations  where  it  has  had 
a  reasonable  chance. 

COMMERCIAL  POWER  A  PUBLIC  TRUST. 

I  know  that  there  is  among  commercial  leaders  a  marked  in- 
crease of  the  feeling  that  commercial  powr  is  largely  a  public 
trust.  It  is  only  fair  to  say  that  most  of  the  great  managers  of 
corporations  are  not  working  for  purely  self-indulgent  ends 
Men  who  have  more  money  than  they  can  spend  on  themselves 
are  not  giving  their  lives  in  strenuous  effort  for  the  mere 
accumulation  of  more  wealth  for  their  own  consumption.  Some 
sort  of  ideal  outside  of  themselves  is  driving  them;  the  desire 

29s 


of  power,  the  lust  of  success  in  the  game.  I  do  not  believe  that 
it  would  be  impossible  to  take  these  present  ideals  and  shape 
them  into  a  broader  conception  of  the  use  of  industrial  power 
for  the  benefit  largely  of  the  public,  leaving  still  the  old  zest  in 
the  game  and  the  chance  of  acquiring  power  for  the  man  best 
able  to  grasp  it  by  fair  and  open  means,  and  hold  it  by  best 
serving  the  public  with  it. 

Where  shall  such  a  system  be  established?  Can  any  number 
of  the  States  agree  on  one  system?  Can  any  one  State  alone 
make  its  own  system  effective? 

The  Federal  Government  is  the  only  power  that  can  carry  on 
such  a  system  of  regulation,  for  it  is  the  only  jurisdiction 
commensurate  with  the  scope  of  present  corporate  operations. 
Any  system  by  the  States  must  always  be,  as  it  is  now,  a  chaos 
of  conflicting  legal  conditions  resulting  in  inefficiency  and  un- 
certainty. 

NO  DANGER  IN  CENTRALIZATION. 

We  must  recognize  that  centralization  in  business  is  an  ac- 
complished fact;  that  the  corporate  interests  who  are  bewail- 
ing "the  danger  of  governmental  centralization"  are  taking  an 
absurd  position.  They  themselves  have  centralized  business  and 
made  it  national.  They  now  object  to  any  corresponding  legal 
centralization  competent  to  deal  with  the  facts  which  they  have 
themselves  established.  As  the  Romans  said,  so  now  these 
astute  opponents  of  all  control  say,  "Divide  and  conquer.'' 

There  is  no  need  that  any  such  Federal  system  of  super- 
vision and  publicity  of  interstate  corporations  should  be  in 
derogation  of  the  powers  of  the  States.  Such  a  system  should  be 
based  wholly  on  interstate  commerce ;  must  indeed  be  so  based, 
or  the  Supreme  Court  will  wipe  it  out  on  the  first  decision.  Such 
a  system  would  simply  carry  out  the  express  provision  of  the 
Constitution  that  the  United  States  shall  have  power  "to  regu- 
late interstate  commerce ;"  it  would  come  into  being  for  the 
same  fundamental  reason  for  which  the  interstate  commerce 
clause  was  originally  placed  in  the  .Constitution,  that  is,  because 
no  one  State,  nor  all  the  States  acting  as  States,  can  effectively 
regulate  interstate  commerce.  The  very  nature  of  the  subject 
matter  renders  the  States  almost  powerless  in  it.  It  is  clearly 
within  the  constitutional  power,  as  it  is  within  the  intent  of  the 
framers  of  that  document.  They  put  the  interstate  commerce 
clause  there  for  just  such  a  purpose,  as  their  debates  show. 

296 


If  the  application  of  this  power  to  this  specific  subject  be  a 
new  one,  it  is  because  the  need  for  such  application  is  newly 
arisen,  and  the  men  who  framed  the  Constitution  were  not  mak- 
ing it  for  their  time  alone,  for  the  stage  coach  and  the  coasting 
schooner,  but  for  the  needs  of  time,  for  the  living,  growing 
future,  not  for  the  dead  past.  The  power  has  been  always  there. 
As  Marshall  said,  "It  is  plenary  itself.  No  past  can  limit  the 
present  use." 

MORAL  ISSUES  INVOLVED. 

I  am  afraid  to  speak  of  morals  in  connection  with  dollars. 
In  the  last  resort,  all  human  institutions  rest  on  personal  char- 
acter. An  individual  may  indeed  do  wrong  and  end  his  life  in 
full  material  success,  though  the  revenges  of  time  usually  work 
themselves  out  even  in  the  short  span  of  human  existence.  But 
no  nation  can  do  wrong  and  escape  the  ultimate  penalty.  No 
system  of  law,  or  arms,  or  politics,  or  business,  that  is  based  on 
inequity  can  live  long  enough  or  pay  enough  profits  to  balance 
the  debit  side  of  the  account  when  that  system  goes  to  its  in- 
evitable ruin.  Industrial  methods  cannot  permanently  diverge 
from  moral  standards  without  industrial  disaster.  No  amount 
of  legislation,  no  amount  of  supervision  by  government,  can 
accomplish  any  permanent  good  unless  that  system  takes  into 
account  the  moral  side  of  the  great  industrial  forces. 

To  each  age  and  each  era  comes  its  own  peculiar  conflict. 
History  has  seen  the  struggles  of  the  race,  first  to  establish  order 
from  chaos ;  to  set  up  kingdoms  instead  of  tribal  confederacies ; 
later,  to  establish  those  great  guaranties  of  personal  liberty  that 
are  now  embodied  in  our  fundamental  law ;  now  finally,  having 
established  these  great  rights  and  institutions,  our  own  time  has 
before  it  the  struggle  with  the  greatest  forces  of  all,  those  tre- 
mendous financial  and  industrial  currents  upon  which  the  civ- 
ilization of  to-day  is  borne. 

In  one  form  or  another  the  conflict  always  has  been  and  al- 
ways will  be  with  us — differing  only  in  form  from  century  to 
century,  but  always  in  substance  the  same,  the  conflict  to  impose 
the  standards  of  righteousness  upon  the  dominant  forces  of  the 
particular  time. 

THE  CHAIRMAN:  I  am  asked  to  announce  that  the 
Committee  on.  Resolutions  will  report  to-morrow  at  10:30 
promptly,  whereupon  the  floor  will  be  open  for  discussion,  and 

297 


those  gentlemen  whose  addresses  may  probably  be  crowded  out 
to-day,  on  account  of  the  shortness  of  time,  will  have  the  floor. 

The  next  speaker  is  a  practical  man  of  affairs,  a  manu- 
facturer from  the  State  of  North  Carolina,  representing  also 
the  State  by  appointment  from  the  Governor.  I  have  pleasure 
in  introducing  Mr.  D.  A.  Tompkins,  of  North  Carolina,  who 
will  speak  on  the  Railways  and  the  People. 
Mr.  D.  A.  Tompkins. 

Mr.  Chairman — The  Federal  Government  was  not  founded  by 
our  forefathers  without  reason  based  upon  very  serious  consid- 
eration. It  was  never  intended  or  desired  that  the  sovereign  ca- 
pacity of  any  State  should  be  impaired.  On  the  other  hand,  it 
was  recognized  that  federation  and  Federal  control  of  matters 
relating  to  war  had  been  the  foundation  upon  which  the  States  had 
achieved  their  independence  of  British  rule.  Therefore,  none 
were  in  position  to  deny  that  at  least  in  matters  of  war  there  was 
need  for  unity  of  action,  and  it  was  clear  that  uniform  action 
could  only  be  accomplished  through  a  central  general  gov- 
ernment. After  the  war  it  was  soon  made  evident,  largely 
through  confusion  in  the  matter  of  import  duties,  that  a 
uniform  control  of  that  subject  would  be  advantageous,  while 
legislation  by  the  different  States  on  the  subject  was  confusing 
and  disadvantageous.  It  was  further  recognized  that  there  were 
a  number  of  subjects  other  than  that  of  war,  over  which  Federal 
control  for  the  sake  of  uniformity  and  other  advantages  was 
desirable.  Amongst  these  was  not  only  the  tariff,  but  also  the 
coinage  of  money,  all  interstate  and  foreign  commerce,  the  estab- 
lishment and  control  of  a  postal  service  and  post  roads,  excise 
duties  upon  whiskey  and  tobacco,  and  things  in  connection  with 
Which  uniformity  over  all  the  States  was  very  advantageous, 
whereas  conflicting  State  legislation  would  lead  to  confusion, 
loss,  and  the  destruction  of  economy.  In  determining  upon  sub- 
jects that  should  be  handled  by  the  Federal  Government,  par- 
ticular care  was  taken  to  include  nothing  which  could  be  handled 
by  the  separate  States.  Thus  was  made  a  nation  of  United 
States— each  State  having  the  strength  of  the  nation  and  yet 
each  reserving  sovereign  power  in  all  affairs  that  were  local.  In 
those  early  days  all  interstate  commerce  of  magnitude  was  prac- 
tically  handled  over  the  high  seas  in  ships.  The  tariff  was  th* 
phase    of    interstate    commerce    with    which    the    legislation    of 

298 


the  different  States  had  most  trouble,  and  in  connection,  with 
which  the  legislation  of  the  different  States  led  to  most  con- 
fusion. At  that  time  the  interstate  commerce  on  land 
was  done  by  wagons,  and  was  by  comparison  with 
the  present  day  all  local.  In  the  present  situation  rail- 
way development  has  brought  the  interstate  commerce  by 
land  to  be  of  even  greater  importance  than  that  by  sea.  Along 
with  the  growth  of  the  railway  system  there  have  grown  up  evils 
of  discrimination,  of  speculation  in  railway  investments,  of  jug- 
gling railway  securities,  and  other  evils  far  greater  than  the 
evils  of  the  tariff  in  the  early  days,  when  the  Federal  Constitu- 
tion was  adopted  and  the  general  government  organized  under 
it.  Therefore,  we  should  endeavor  to  be  as  wise  as  our  fore- 
fathers, and  when  we  find  that  a  department  of  interstate  com- 
merce has  been  brought  into  much  confusion  and  no  order  by 
multitudinous  State  legislation,  and  when  we  find  also  that  inter- 
state commerce  on  land  has  grown  to  be  entirely  beyond  the 
control  of  any  one  State,  it  is  very  important  that  we  take  steps 
to  bring  it  under  one  general  control  and  to  a  condition  of 
uniform  treatment  throughout  the  United  States. 

THE  STATES  AND  THE  RAILWAYS. 

At  present  we  have  two  opposing  influences  to  make  confusion 
and  dissatisfaction :  One  of  them  is  drastic  State  legislation  inaug- 
urated in  many  instances  by  demagogic  politicians,  but  largely  sup- 
ported by  good  State  officers  and  many  good  people,  because  of 
evils  of  railway  organization  and  management.  On  the  other  side, 
the  railway  companies  themselves  are  indulging  in  many  evil  prac- 
tices, such  as  discrimination,  speculation,  the  issuing  of  vitiated 
securities ;  and  as  the  tendency  on  one  side  is  to  make  legislation 
more  drastic,  so  the  tendency  seems  to  be  on  the  other  side  to 
hold  with  increasing  dogged  tenacity  to  a  situation  which  gives 
opportunity  for  the  evil  practices,  against  which  the  people  are 
so  exasperated,  and  justly  exasperated.  It  is  plain  that  the 
escape  from  both  of  these  unsatisfactory  situations  lies  in  some 
course  leading  to  the  abolishment  of  both.  It  is  as  important 
now  to  escape  the  confusion  and  injury  of  further  drastic  legis- 
lation, as  it  is  to  escape  the  railway  evils.  It  is  equally  as  im- 
portant to  escape  the  railway  evils  as  to  escape  the  drastic  legis- 
lation. The  middle  course  by  which  we  escape  both  of  these 
evils  at  once  is  the  same  as  that  adopted  by  our  forefathers  to 

299 


escape  the  evils  of  multitudinous  State  legislation  about  the 
tariff.  It  is  the  same  which  brought  a  good  banking  system  and 
a  uniformly  safe  currency  out  of  the  former  confused  condition 
of  money  issued  by  State  banks  under  the  multitudinous  and 
various  State  laws.  State  rights  are  not  in  the  slightest  degree 
infringed  if  a  subject  is  relegated  to  the  general  government 
which  is  wholly  beyond  the  control  of  the  States.  The  consti- 
tution has  wisely  relegated  to  the  control  of  general  government 
things  which  are  national  in  their  character,  and  concerning 
which  legislation  by  many  States  leads  to  confusion,  rather  than 
order.  Federal  control,  examination,  and  publicity  would,  in  my 
opinion,  have  the  same  effect  upon  the  railways,  as  it  had  upon 
the  national  banks.  By  this  means  it  would  not  only  be  that  the 
operations  of  the  roads  would  be  regulated,  but  the  issuing  of 
all  railway  securities  would  be  regulated,  and  the  condition  of 
railway  finances  made  public.  Thus  investment  in  railway  securi- 
ties would  be  brought  within  the  reach  of  the  people,  and  the 
present  complaint  on  the  part  of  the  railway  managements  about 
the  difficulty  of  getting  money  for  necessary  extensions  and  im- 
provements would  all  be  gone.  The  people  along  the  lines  of 
the  roads  would  buy  their  securities,  as  the  people  in  each  local- 
ity now  buy  national  bank  stock.  A  large  volume  of  national 
bank  stock  of  the  United  States  is  now  held  by  widows  and 
orphans,  by  sanction  of  the  courts.  What  court  would  in  the 
present  situation,  permit  the  money  of  widows  and  orphans  to 
be  invested  in  railway  securities,  or  to  remain  invested,  even 
where  the  deceased  husband  and  father  had  already  bought 
them? 

POWER  OF  THE  NATION  TO  REGULATE  COMMERCE. 

The  question  of  constitutional  right  for  such  government 
control,  regulation,  and  publicity  is  amply  provided  for  in  the 
constitution,  and  on  two  different  counts.  The  constitution  pro- 
vides for  the  control  by  the  Federal  government  of  interstate  and 
foreign  commerce.  This  is  ample  authority  alone,  but  the  con- 
stitution also  provides  for  the  control  by  the  Federal  government 
of  the  mail  service  and  post  roads.  We  are  prone  to  forget,  in 
a  degree,  that  every  railroad  is  a  post  road,  and  that  it  carries 
the  mails.  The  railway  people  themselves  sometimes  remember 
this  in  case  of  strikes,  but  they  don't  remember  it  when  it  comes 
to  obeying  the  general  laws  relating  to  discrimination,  rebates, 

300 


combinations,  and  the  issuance  of  watered  securities.  It  is  idle 
to  complain  of  drastic  State  legislation,  until  some  remedy  has 
been  found  for  the  railway  evils.  It  is  self-evident  that  no  State 
legislation  can  accomplish  a  remedy  for  railway  evils,  except  by 
harassment,  and  this  harassment  is  very  dangerous  to  com- 
merce. It  is  idle  to  talk  about  the  railways  reforming  them- 
selves. They  will  never  do  it  until  forced.  Many  railroad  men 
will  help,  but  the  ultimate  reform  must  be  made  by  the  whole 
people.  The  controversy  has  come  to  be  one  of  an  evil  on  one 
side  against  an  evil  on  the  other  side.  The  roads  complain  about 
drastic  State  legislation,  while  the  people  of  every  State  are 
complaining  of  railway  evils,  and  bitterly  resenting  the  idea  that 
railway  investments  have  been  put  by  speculation  and  fraud 
wholly  beyond  the  reach  of  the  people  themselves.  If  these 
lailway  evils  existed  in  one  State  only,  the  State  might  well 
undertake  its  remedy.  The  best  legislation  any  State  could 
make  would  be  to  request  the  Federal  government  to  immedi- 
ately inaugurate  a  system  of  control,  regulation  and  publicity 
for  all  the  railways  of  the  country  upon  precisely  the  same  lines 
by  which  the  general  government  now  controls,  regulates,  and 
makes  public  the  affairs  of  national  banks.  So  far  from  State 
rights  being  infringed,  any  State  would  be  exercising  one  of  its 
highest  rights  to  appeal  to  the  general  government  to  remedy 
an  evil  with  which  the  State  itself  is  unable  to  cope,  and  pre- 
cisely as  the  State  would  appeal  to  the  general  government  in 
case  war  was  declared  against  it. 

THE  PROBLEM  A  NATIONAL  ONE. 

The  usurpation  by  the  general  government  of  the  control  with- 
in a  State  of  anything  which  the  State  could  handle  by  itself 
would  be  an  infringement  of  the  State's  rights.  The  reference 
by  a  State  of  a  matter  beyond  its  control  to  the  control  of  the 
general  government,  is  one  of  the  highest  and  most  important 
of  the  rights  of  the  States  which  are  in  the  American  Union, 
and  while  none  could  be  more  opposed  than  I  to  the  surrender 
of  any  State's  rights,  none  could  appreciate  more  than  I  the 
right  of  a  State  to  call  the  general  government  to  its  aid  to  help 
it  in  connection  with  a  matter  that  was  beyond  its  power  of 
handling  and  control. 

At  the  conclusion  of  his  address,  Mr.  D.  A.  Tompkins  pre- 
sented the  following  resolutions: 

301 


Whereas,  Federal  control  and  regulation  of  National  Banks 
as  a  rule  has  been  effective  and  satisfactory,  and 

Whereas,  The  Federal  control  of  banks  is  only  in  matters 
where  the  separate  States  have  failed  to  protect  the  interests  of 
the  people,  and 

Whereas,  Such  Federal  control  in  no  way  interferes  with 
the  business  of  the  banks,  but  only  with  evils,  and  only  those 
evils  which  the  States  have  failed  to  correct,  and 

Whereas,  The  same  plan  of  remedy  would  seem  applicable 
to  interstate  commerce ;  therefore  be  it 

Resolved,  That  the  consensus  of  opinion  of  this  conference  is : 

(i.)  That  all  laws  against  combinations  in  restraint  of  trade 
be  repealed  and  that  new  laws  be  passed  against  the  evils  of 
combinations. 

(2.)  That  when  these  evils  continue  in  spite  of  State  laws, 
the  Federal  Government  shall  assume  control  of  the  evils  of  the 
trade  and  regulate  the  same  in  the  interest  of  the  people. 

(3.)  That  all  railways  doing  an  interstate  business  be  sub- 
jected to  Federal  control  in  matters  which  are  beyond  the  control 
of  State  laws. 

(4.)  In  all  cases  of  corporations  doing  an  interstate  business 
the  Federal  control  should  include  examinations  of  accounts, 
publication  of  same,  and  in  the  case  of  railways  regulation  of 
issues  of  securities,  to  the  end  that  the  people  could  with  safety 
invest  in  them,  and  in  all  cases  requiring  fair  and  equitable  deal- 
ings with  the  people. 

(5.)  That  the  Federal  Government  should  do  nothing  which 
the  States  can,  or  fail  to  do,  with  equal  effect,  nor  should  the 
Federal  Government  undertake  control  of  any  phase  of  business 
which  is  legitimate,  but  only  the  evils  of  business. 

(6.)  That  American  commerce  should  be  fostered  and  de- 
veloped along  lines  of  the  greatest  possible  liberty  of  trade  for 
all  the  people,  and  the  least  possible  Government  ownership,  and 
no  Government  interference  except  against  evils. 

SECRETARY  REYNOLDS  :  Mr.  Easley  has  just  handed  me 
a  notice  which  he  requests  read  at  once.  At  an  earlier  session  it 
was  stated  that  a  Committee  on  Ways  and  Means  to  take  care 
of  the  expenses  of  this  conference  would  be  appointed.  This 
Committee  has  been  named,  and  is  composed  of  the  following 
members  of  the  conference : 

302 


FINANCE  COMMITTEE. 

Theodore  Marburg,  Maryland, 

F.  B.  Sears,  Massachusetts, 

Mr.  Mahlon  N.  Kline,  Pennsylvania, 

Franklin  MacVeagh,  Chicago, 

E.  A.  Bancroft,  Chicago. 
THE  CHAIRMAN :  The  next  speaker  will  be  a  representa- 
tive of  the  State  of  New  York,  and  one  of  whom  the  State  of  New 
York  is  justly  proud.  He  represents  also  the  Wholesale  Drug- 
gists' Associations  and  his  subject  is,  "Reasonable  Agreements 
Beneficial  to  Commerce."  I  have  the  honor  of  introducing  Mr. 
W  illiam  J.  Schieffelin,  of  New  York. 

Mr.  William  Jay  Schieffelin. 
Mr.  Chairman — Thirty  years  ago  the  wholesale  drug  trade  of 
the  United  States  was  in  a  demoralized  condition.  Competi- 
tion was  fierce,  especially  in  proprietary  medicines,  which  con- 
stitute more  than  half  of  the  average  drug  jobber's  business. 
There  was  little  or  no  profit  on  these  goods,  and  with  many 
wholesale  druggists  it  was  a  severe  struggle  for  mere  existence. 
The  situation  became  so  acute  that  it  was  absolutely  necessary 
to  find  a  remedy,  and  about  that  time  the  wholesale  druggists 
of  the  country,  all  suffering  from  the  disastrous  results  of  ex- 
cessive competition  in  proprietary  medicines,  formed  their 
Association.  Upon  the  petition  of  the  Association,  many  pro- 
prietors of  these  goods  adopted  the  so-called  "rebate  plan"  in 
the  mutual  interest  of  the  jobbers  and  themselves.  Under  this 
plan  the  proprietor  fixed  a  uniform  wholesale  price  for  his  goods 
all  over  the  country,  and  paid  the  jobber  a  rebate  therefrom, 
upon  condition  that  the  latter  would  not  sell  below  that  price; 
the  matter  being  covered  by  a  contract  or  agreement  between  the 
proprietor  and  each  of  his  wholesale  distributers.  This  rebate 
or  discount  constituted  the  jobber's  entire  compensation  for 
handling  the  proprietor's  goods,  and  the  allowance  was  only  a 
reasonable  one,  being  but  little  more  than  the  cost  of  transacting 
the  wholesale  drug  business.  The  jobber  was  thereby  insured  a 
steady,  although  small,  profit  on  proprietary  articles,  and  the 
cut-throat  competition  which  formerly  prevailed  in  the  whole- 
sale drug  trade  on  this  class  of  goods  was  greatly  reduced.  The 
present  margin  of  profit  in  the  wholesale  drug  business  is  not 
to  exceed  3  per  cent,  on  the  total  amount  of  sales,  which  is  a 

303 


very  moderate  return,  considering  the  large  capital  invested  and 
the  technical  knowledge  required  to  conduct  the  business. 

ORGANIZATION  IN  THE  DRUG  TRADE. 

While  the  "rebate  plan"  provided  a  reasonable  remuneration 
for  the  jobber,  it  gave  no  protection  to  the  large  army  of  retail 
druggists  who  some  years  later  were  compelled  to  sell  proprie- 
tary medicines  practically  at  cost,  to  meet  the  ruinous  competi- 
tion of  department  stores  and  the  few  large  retailers  who  made 
a  specialty  of  cutting  prices  on  these  articles,  mainly  for  the 
purpose  of  drawing  customers  to  their  stores  and  selling  them 
other  goods  on  which  they  made  a  large  profit.  In  order  to 
assist  the  rank  and  file  of  the  retail  drug  trade,  many  proprie- 
tors adopted  about  seven  years  ago  what  was  known  as  the 
"tri-partite  plan,"  under  which  they  required  their  wholesale 
distributers  to  refuse  sales  of  their  goods  to  the  "aggressive 
cutters,"  who  insisted  upon  selling  below  the  prices  agreed  upon 
by  most  of  the  retailers  in  their  respective  communities. 

The  "direct  contract  and  serial  numbering  plan"  was  later 
adopted  by  some  of  the  proprietors,  who  fixed  both  the  retajl 
and  wholesale  prices  on  their  goods,  and  took  direct  contracts 
from  the  retailers  as  well  as  the  wholesalers,  requiring  them  not 
to  sell  below  such  prices. 

Under  none  of  these  plans  were  the  prices  of  proprietary 
medicines  unreasonably  increased.  They  were  never  advanced 
beyond  the  retail  prices  marked  on  the  goods  by  the  proprietors 
themselves,  and.  in  fact,  the  retailers  sold  considerably  below 
such  prices  in  the  great  majority  of  cases. 

ORGANIZATION  ADJUDGED  IN  VIOLATION  OF  SHERMAN  ANTI- 
TRUST LAW. 

Unfortunately,  however,  some  mistakes  occurred  in  the  oper- 
ation of  the  "trip-partite  plan,"  the  principal  one  being  the  ef- 
fort of  the  retailers,  through  a  so-called  "honor  roll,"  to  per- 
suade jobbers  to  refuse  goods  of  every  kind  to  "aggressive  cut- 
ters." This  led  to  excesses,  which  occasionally  took  on  the 
appearance  of  an  attempt  at  tyranny,  and  the  result  was  that  the 
Government  brought  a  suit  against  the  proprietors,  wholesalers 
and  retailers,  on  a  charge  of  combination  or  conspiracy  to 
restrain  trade  in  violation  of  the  Sherman  Anti-Trust  law.  As 
the  outcome  of  this  suit,  the  United  States  Circuit  Court  at 

304 


Indianapolis  issued  a  decree  forbidding  any  further  co-operation 
between  the  three  branches  of  the  trade  in  carrying  out  any 
plans  for  the  sale  of  goods,  and  even  enjoining  the  wholesalers 
and  retailers,  through  their  respective  Associations,  from  making 
any  effort  to  secure  the  adoption  by  proprietors  of  plans  for  the 
maintenance  of  their  prices.  But  the  decree  does  not  deny  the 
right  of  a  manufacturer  to  adopt  and  enforce  any  plan  he  may 
choose  for  the  sale  of  his  own  goods,  provided  his  action  is 
individual  and  not  in  combination  with  any  other  person  or  as- 
sociation. 

While  some  errors  were  made  in  the  attempt  to  improve  the 
deplorable  conditions  existing  in  the  retail  drug  trade,  they  were 
due  to  an  excess  of  zeal,  and  there  was  no  intention  on  the  part 
of  any  one  concerned  to  violate  the  law. 

It  was  a  great  injustice  to  designate  as  a  "Drug  Trust"  the 
trade  arrangements  which  existed  among  manufacturers,  whole- 
salers and  retailers  for  the  sale  of  proprietary  articles.  On  the 
contrary,  these  arrangements  were  directly  opposed  to  the 
"trust"  idea.  Their  object  was  simply  to  establish  uniform  sell- 
ing prices  which  provided  only  a  fair  margin  of  profit,  so  that 
the  thousands  of  small  dealers  could  continue  in  business  instead 
of  being  driven  out  by  the  comparatively  few  "aggressive  cutters" 
whose  methods  tended  to  monopolize  the  business  in  their  own 
hands. 

Until  the  Government  suit  was  brought  against  the  drug  in- 
terests it  had  always  been  supposed  that  the  Sherman  Anti- 
Trust  law  was  intended  for  the  protection  of  the  many  aganist 
the  few.  It  was  used,  however,  to  produce  exactly  the  opposite 
result  in  this  case.  It  was  also  humiliating  that  the  whole  drug 
trade  of  the  United  States  should  be  branded  as  conspirators  and 
lawbreakers  because  they  were  parties  to  trade  arrangements 
which  had  always  been  considered  entirely  proper  until  the  Sher- 
man law  was  invoked.  It  has  been  truly  said  that  it  is  not  possi- 
ble to  indict  a  whole  nation,  but  now  our  own  Government  has 
enjoined  a  whole  trade,  because  the  number  of  druggists  who  had 
not  signed  the  contracts  was  so  small  as  to  be  practically  neg- 
ligible. 

The  Sherman  law  is  such  a  broad  one  that  the  injunction  in 
the  Government  suit  completely  tied  the  hands  of  the  two  large  as- 
sociations existing  in  the  wholesale  and  retail  branches  of  the  drug 
trade,  and  prevents  either  of  them  from  making  any  organized 
effort  to  obtain  protection  from  the  manufacturers  whose  goods 

305 


they  handle.  It  can  hardly  be  conceived  that  the  law  was  ever 
intended  to  work  such  a  great  hardship  upon  thousands  of  good 
citizens  engaged  in  the  same  line  of  business.  Unless  this  law 
is  so  amended  as  to  permit  reasonable  agreements  which  are  bene- 
ficial to  commerce  and  which  do  not  conflict  with  the  public  wel- 
fare in  any  way,  the  business  men  of  this  country  will  undoubt- 
edly be  placed  at  a  great  disadvantage.  If  this  law  should  be 
literally  applied,  it  will  cause  the  greatest  possible  restraint  of 
trade,  although  it  was  intended  to  prevent  that  condition.  Rea- 
sonable agreements  do  not  restrain  trade,  but  promote  it. 

POSSIBLE  SCOPE  OF  THE  SHERMAN  ACT. 

Should  the  Sherman  law  be  pushed  to  its  logical  conclusion, 
the  merchants  and  manufacturers  who  are  being  held  to  a  strict 
accountability  under  it  are  not  the  only  class  of  citizens  whom  it 
will  involve.  For  instance,  it  is  well  known  that  the  farmers, 
through  their  associations,  fix  the  price  of  cotton,  and  perhaps 
other  commodities  produced  by  them.  According  to  the  news- 
papers, such  associations  have  not  only  established  minimum  sell- 
ing prices  on  cotton,  but  have  arranged  for  storing  and  holding 
the  crops  until  purchasers  are  compelled  to  buy  at  the  prices 
fixed  by  them.  Labor  unions  have  also  been  actively  engaged 
for  many  years  in  making  agreements  with  their  employers,  fixing 
the  prices  of  labor,  regulating  the  hours  of  work,  etc.  It  is 
hardly  necessary  to  refer  to  the  many  strikes  and  boycotts  which 
have  been  inflicted  upon  the  country,  often  with  serious  results 
to  the  public  interest,  as  they  are  matters  of  common  knowledge. 
Once  the  toiling  and  voting  masses  of  the  nation  realize  that  their 
own  interests  are  threatened  by  the  Sherman  law,  it  is  easy  to 
conceive  that  our  national  legislators  will  no  longer  fail  to  ap- 
preciate the  necessity  of  correcting  its  defects. 

EUROPEAN  LAW  RELATING  TO   MERCHANTS  AND   MANUFAC- 
TURERS' ASSOCIATIONS. 

In  striking  contrast  to  the  restrictions  imposed  by  the  Sher- 
man law  in  our  own  country,  it  is  enlightening  to  observe  what 
absolute  freedom  of  trade  is  permitted  by  the  governments  of 
other  countries,  notably  England,  France  and  Germany,  which 
place  practically  no  legal  restrictions  upon  agreements  regulating 
the  prices  and  sale  of  goods. 

Through  the  courtesy  of  the  Department  of  State  at  Wash- 

306 


ington  a  scries  of  questions,  prepared  by  me,  were  answered  by  the 
American  Consuls  in  more  than  fifty  of  the  principal  cities  in 
the  three  countries  named.  Under  each  question  is  given  a  brief 
synopsis  in  a  general  way  of  the  answers  received.  Quotations 
are  also  made  from  some  of  the  reports  in  a  number  of  instances 
where  the  information  is  of  special  interest  at  this  time. 

Question  No.  i. 

"Are  agreements  on  prices  and  terms  between  a  number  of 
dealers,  a  number  of  manufacturers,  or  both  manufacturers  and 
dealers,  permitted  by  law?" 

The  answers  state  that  such  agreements  are  legal  in  Great 
Britain,  France  and  Germany. 

Our  Consul  at  Liverpool,  England,  says:  ''There  is  absolute 
freedom  in  England  in  regard  to  all  agreements  as  to  prices  and 
terms  between  a  number  of  dealers,  a  number  of  manufacturers, 
or  both  manufacturers  and  dealers.  No  law  has  been  enacted 
restricting  such  freedom." 

Our  Consul  at  Dundee,  Scotland,  writes:  "In  considering  the 
question  of  sales  and  trade  agreements  as  obtaining  in  Scotland, 
it  has  to  be  noted  that  the  tendency  of  all  Scottish  legislation  is  to 
refrain  as  far  as  possible  from  interfering  with  the  unquestioned 
right  of  the  individual  to  buy  and  sell  where  he  finds  what  he  con- 
siders to  be  his  best  market.  He  has  the  utmost  freedom  to  attach 
any  conditions  which  are  not  contrary  to  public  policy  to  any  pur- 
chase or  sale  he  may  make,  and  what  is  said  of  individuals  applies 
with  equal  force  to  combinations  of  individuals.  There  is, 
therefore,  no  legal  objection  to  dealers  or  manufacturers,  or  both, 
entering  into  agreements  among  themselves  or  between  them- 
selves and  others  in  regard  to  prices  and  terms." 

The  following  is  from  our  Consul  at  Belfast,  Ireland :  "The 
Ulster  Drug  Trade  Association,  with  headquarters  in  Belfast,  is 
composed  of  retail  druggists.  Its  objects,  as  stated  in  its  printed 
price  lists,  are:  'To  regulate  from  time  to  time  the  retail  prices 
of  patent  and  proprietary  articles  dealt  in  by  the  trade.  To  main- 
tain a  uniform  minimum  selling  price  for  all  patent  and  pro- 
prietary articles/  Each  member  signs  an  agreement  to  sell  all 
such  articles  'at  prices  not  less  than  the  prices  set  forth  in  the  As- 
sociation's price-list/ 

"The  Proprietary  Articles  Trade  Association,  organized  in 
1896,  has  a  membership  throughout  the  United  Kingdom.  It  in- 
cludes manufacturers  of  proprietary  articles,  and  wholesale  and 
retail  dealers  in  the  same.     Its  affairs  are  directed  by  a  council 

307 


of  thirty  members,  elected  annually,  ten  from  the  manufac- 
turers, ten  from  the  wholesalers  and  ten  from  the  retailers. 
Among  the  objects  named  are  'The  taking  of  such  steps  as  the 
Association  may  be  advised  are  legal  to  deal  with  extreme  cutting 
of  prices.' 

"This  association  issues  a  'List  of  Protected  Articles/  with 
the  minimum  wholesale  and  retail  prices  of  each.  This  printed 
list  has  the  following  notice  at  its  head :  'Dealers  in  the  articles 
included  in  the  following  lists  are  respectfully  informed  that  the 
articles  referred  to  are  supplied  to  the  trade  only  upon  condition 
that  they  be  not  resold  below  the  prices  therein  stipulated,  and 
that  all  wholesale  houses  dealing  in  the  articles  are  under  agree- 
ment with  the  manufacturers  not  to  supply  them  to  firms  who 
sell  them  below  the  stipulated  price.'  In  case  any  dealer,  whole- 
sale or  retail,  is  proved  to  have  sold  proprietary  goods  below  the 
minimum  price  fixed  by  the  Association,  his  name  is  placed  on 
the  'stop  list,'  which  is  defined  as  'the  list  of  firms  from  whom 
it  is  found  necessary  to  withhold  supplies.'  The  offending  firm 
can  obtain  no  further  supply  of  any  goods  included  in  the  Asso- 
ciation's 'protected  list'  from  either  the  manufacturers  or  from 
other  dealers." 

Our  Consult  at  Bordeaux,  France,  reports:  "In  France  trade 
is  practically  free  and  unrestrained,  manufacturers  and  dealers 
being  at  liberty  to  fix  the  price  of  the  goods  they  manufacture 
or  sell.  Under  the  law,  they  have  the  right  to  combine  for  the 
study  and  protection  of  their  interests.  They  have  the  right 
also  to  make  agreements  as  to  prices,  but  the  law  imposes  certain 
restrictions.  For  instance,  if  the  'holders'  of  an  article  combine 
to  force  its  price,  they  may  be  prosecuted  under  Section  419  of 
the  French  Penal  Code,  which,  it  would  appear,  was  enacted  for 
the  purpose  of  forbidding  'corners'  and  monopolies." 

The  following  is  from  our  Consul-General  at  Berlin,  Ger- 
many: "There  are  no  laws  in  Germany,  either  national  or  state, 
which  are  specially  directed  against  the  formation  of  combina- 
tions for  the  purpose  of  conserving  and  promoting  the  interests 
of  the  various  trades.  These  combinations,  called  'Verbande/ 
'Kartellen,'  syndicates,  etc.,  have  risen  to  such  a  degree  of  im- 
portance that  they  exercise  a  powerful  influence  upon,  if  not 
control  the  industrial  and  commercial  conditions  of  Germany. 
In  fact,  the  organizations  of  German  manufacturers  and  pro- 
ducers cover  practically  the  entire  field  of  industrial  activity  in 
this  country.     The  various  forms  of  syndicates  are  organized 

308 


under  the  German  law  of  corporations.  *  *  *  The  contracts 
and  agreements  of  the  cartels  like  those  of  all  business  enter- 
prises are  subject  to  the  provisions  of  the  Civil  Code  and  Code 
of  Commerce.  Proceedings  have  been  frequently  taken  against 
the  combinations,  based  upon  Paragraph  138  of  the  Civil  Code, 
which  states  that  any  agreement  is  null  and  void  which  is  op- 
posed to  the  principles  of  moral  law  or  which  may  result  in 
usurious  extortion,  and  also  upon  the  plea  that  the  agreements 
made  by  cartels  had  a  tendency  to  restrict  the  enjoyment  of  in- 
dustrial liberty. 

"The  Supreme  Court  of  Justice  of  Germany  at  Leipsic  has 
decided  in  many  cases  that  the  agreements  of  the  cartels  were 
not  null  from  the  mere  fact  that  such  agreements  have  been 
made,  but  that  it  could  be  possible  to  contest  the  agreements,  in 
the  general  interest  of  the  industrial  and  commercial  world  and 
of  the  people  at  large,  and  to  protect  industrial  liberty,  when 
the  agreements  tended  to  control  the  markets  for  speculative  pur- 
poses, or  to  create  a  monopoly  and  eliminate  legitimate  competi- 
tion, so  that  merchandise  would  be  sold  at  extortionate  prices. 
Agreements,  however,  made  in  good  faith  to  protect  certain 
branches  of  trade  from  a  ruinous  fluctuation  of  prices  owing  to 
a  needless  competition,  are  not  contrary  to  the  principles  of 
morality  and  do  not  tend  to  restrict  industrial  liberty,  but  are 
only  the  legitimate  results  of  an  act  of  self-defence,  taken  in 
the  interest  of  the  trades  concerned.  In  other  words,  the  Ger- 
man Supreme  Court,  up  to  the  present  time,  has  rejected  the 
interpretation  of  Article  138  of  the  Civil  Code  which  would  tend 
to  nullify  the  agreements  of  the  syndicates  as  contrary  to  the 
principles  of  morality,  and  has  officially  recognized  the  economic 
justification  of  combinations  and  their  right  to  legal  protection 
unless  they  use  unlawful  methods  of  checking  competitors  who 
refuse  to  join  them." 

Our  Vice-Consul-General  at  Frankfort,  Germany,  says: 

"As  yet  no  anti-trust  laws  have  been  issued  in  Germany; 
there  has  been  no  necessity  for  them,  because  the  measures 
adopted  by  the  trusts  and  combines  to  fix  moderate  prices  with 
a  fair  margin  of  profit  have  proved  beneficial  to  all — to  the 
trusts,  the  traders  and  the  public — on  account  of  the  increased 
stability  of  prices  and  reasonable  terms. 

"The  Government  seems  rather  to  favor  the  trusts,  and  in 
some  instances  Government  officials  have  been  permitted,  after 

309 


having  nominally   resigned   their  posts,   to   act  as   managers   of 
such  organizations." 

COERCIVE      ACTION      PERMISSIBLE      FOR      MANUFACTURERS* 

ASSOCIATIONS. 

Question  No.  2. 

"What  penalties,  if  any,  are  associations  or  manufacturers 
allowed  to  impose  on  dealers  who  violate  agreements  or  ac- 
cepted terms?" 

The  gist  of  the  answers  is  that  they  are  free  to  stop  sup- 
plies or  impose  such  pecuniary  penalties  as  they   may  see  fit. 

Our  Consul  at  Liverpool,  England,  reported: 

"Penalties  imposed  by  associations  or  manufacturers  for  a 
violation  of  any  agreement  entered  into  or  accepted  by  them 
are  en  forcible." 

Our  Consul  at  Edinburgh,  Scotland,  writes: 

"Associations  or  manufacturers  may  refuse  to  sell  to  dealers 
who  violate  agreements  or  accepted  terms.  Or  they  may  exact 
payment  of  a  penalty  for  violation  of  the  agreement,  as  a  condi- 
tion precedent  to  further  sales  to  such  dealers.  If  the  agree- 
ment between  an  association,  or  manufacturers,  and  dealers  is 
in  the  form  of  a  contract,  prescribing  a  penalty  for  violation, 
this  penalty  may  be  enforced  at  law.  It  has  been  held,  how- 
ever, that  though  a  contract  stipulates  for  a  sum  as  a  penalty 
or  as  liquidated  damages,  the  court  may,  in  the  exercise  of  its 
equitable  jurisdiction,  modify  the  amount  if  it  is  exorbitant." 

From  our  Vice-Consul  at  Glasgow,  Scotland: 

"Such  agreements  may  contain  a  clause  or  clauses  imposing 
penalties  for  failure  to  fulfil  the  conditions  set  forth  therein. 
If  the  restraint  contained  in  the  agreement  is  such  as  only  to 
afTord  fair  protection  to  the  interests  of  the  party  in  favor  of 
whom  it  is  given,  and  is  not  so  far-reaching  as  to  interfere  with 
the  interests  of  the  public,  an  action  for  payment  of  the  penalties 
specified  in  the  agreement  would  probably  be  sustained  by  the 
court." 

Our  Consul  at  Nice,  France,  reports: 

"There  is  no  'associations'  of  druggists  in  this  Consular 
District,  but  if  there  were  they  would  be  allowed  to  impose  on 
dealers  who  violate  agreements  or  accepted  terms  such  penal- 
ties as  each  'association'  might  deem  proper  to  inflict  by  rules 
established  by  it." 

310 


Our  Consul-General  at  Berlin,  Germany,  says: 

"The  nature  of  the  penalties  to  be  imposed  by  syndicates 
on  its  members  or  on  dealers  who  violate  agreements  or  ac- 
cepted terms  is  usually  stated  in  the  statutes  of  the  cartel, 
and  if  the  syndicate  has  not  been  declared  illegal,  the  penalties 
can  be  enforced  through  the  courts  of  justice.  In  the  Steel 
Syndicate  a  strict  surveillance  is  exercised,  and  serious  penalties 
are  inflicted  upon  any  manufacturer  who  violates  the  stipula- 
tions of  the  cartel.  Blank  acceptances  are  signed  by  each  mem- 
ber and  put  in  the  hands  of  the  treasurer  of  the  syndicate. 
Should  a  member  be  fined,  the  treasurer  fills  in  the  amount  of 
such  penalty  on  the  signed  check  and  puts  it  into  circulation.  In 
case  of  dispute  between  a  manufacturer  and  the  syndicate,  the 
matter  is  referred  for  decision  to  a  committee  of  arbitration  of 
the  cartel. 

"In  Germany  there  exists  a  protective  organization  of  drug 
and  perfumery  manufacturers  with  an  international  membership, 
called  the  'Verband  der  Fabrikanten  von  Markenartikeln  E.  V.' 
an  association  of  manufacturers  of  articles  which  have  copy- 
righted brands,  such  as  Odol,  Roger  and  Gallet  perfumery,  etc. 
Its  customers  are  bound  by  an  agreement  not  to  sell  any  of  the 
products  of  its  members  at  other  than  fixed  prices  or  to  anybody 
who  may  be  blacklisted.  An  infringement  of  the  agreement  is 
punishable  by  the  refusal  of  the  members  of  the  association  to 
supply  goods  to  the  guilty  party." 

From  our  Vice-Consul  at  Plauen,  Germany: 

"Fines,  to  almost  any  extent,  if  previously  fixed  and  agreed 
to,  are  allowed  to  be  imposed  on  dealers  who  violate  the  ac- 
cepted terms  or  agreements  made  with  associations,  manufac- 
turers, wholesalers  or  others,  as  long  as  the  penalties  are  not 
considered  an  offence  against  good  customs,  when  the.  law 
courts  can  be  called  upon  to  judge  whether  the  terms  are  rea- 
sonable or  not." 

Question  No.  j. 

"Does  the  country  to  which  you  are  accredited  prohibit 
manufacturers  or  dealers  from  fixing  prices  with  a  fair  margin 
of  profit  on  their  wares?" 

The  answers  show  that  it  is  lawful  for  manufacturers  and 
dealers  to  fix  whatever  prices  they  choose  on  their  goods.  In 
Germany,  however,  the  Government  fixes  the  prices  of  medicine 
other  than  proprietary  articles,  and  a  severe  fine  is  imposed  on 
those  dealers  whose  charge  more  than  the  legal  rate. 

311 


Question  No.  4. 

"Does  it  distinguish  between  articles  known  as  'necessities 
of  life'  and  other  articles  in  trade  agreements?" 

No  distinction  is  made  except  in  France,  where  the  munici- 
pal authorities  sometimes  fix  the  price  of  bread,  meat  and  pos- 
sibly other  "necessities  of  life." 

Question  No.  5. 

"Does  it  distinguish  between  articles  protected  by  patents 
or  trade  marks  and  those  which  are  not?" 

According  to  the  answers,  there  is  no  distinction  made. 
Question  No.  6. 

"Does  it  permit  a  manufacturer  of  proprietary  or  other 
articles  to  refuse  sales  of  his  goods  to  a  dealer  who  violates 
the  prices  and  terms  of  other  manufacturers?" 

It  is  clear  from  the  answers  that  a  manufacturer  can  legally 
refuse  to  sell  to  any  one  he  pleases. 

Our  Consul  at  Liverpool,  England,  writes: 

"A  manufacturer  of  proprietory  or  other  articles  in  this 
country  can  legally  refuse  to  sell  his  goods  to  a  dealer  who  has 
violated  the  prices  and  terms  of  other  manufacturers.  One  of 
the  leading  legal  authorities  in  England  upon  the  submission 
to  him  a  test  question  and  his  opinion  may  be  accepted  as  a 
correct  interpretation  of  English  law  on  the  subject,  replied 
'that  it  would  not  be  illegal  for  an  association  of  dealers  in 
proprietary  articles,  instead  of  stating  two  prices,  to  refuse 
altogether  to  supply  a  man  who  did  not  sell  at  the  prices  which 
they  stipulated — that  is  to  say,  that  they  could  legally  under- 
take either  by  themselves  or  through  their  agents  to  refuse 
to  supply  a  man  with  all  or  any  of  the  articles  sold  by  them 
respectively  because  he  cut  one  of  them  below  the  prices  stipu- 
lated for  by  the  particular  manufacturer  who  owned  it.' " 

Our  Vice-Consul  at  Glasgow,  Scotland,  says: 

"A  manufacturer  of  articles  of  any  kind  can  lawfully  refuse 
to  sell  to  anyone  without  even  assigning  a  reason." 

From  our  Consul  at  Bordeaux,  France: 

"A  manufacturer  of  proprietary  or  other  articles  is  free  to 
sell  or  not  to  sell  his  goods  to  whom  he  pleases.  The  manu- 
facturers of  any  line  of  goods  having  come  to  an  agreement, 
may  refuse  to  sell  to  a  dealer  who  may  have  violated  the  prices 
and  terms  of  other  manufacturers.  Under  the  civil  law,  how- 
ever, such  dealer  has  the  right  to  have  a  'proces'  issued  to  de- 

312 


termine  the  validity  of  the  agreement,  but  no  eriminal  aetion 

can  be  taken." 

Our  Vice-Consul-General  at  Frankfort,  Germany,  says : 

"No    law    in    Prussia    prohibits    a    manufacturer    to    refuse 

sales  of  his  goods  to  a  dealer  who  violates  the  prices  and  terms 

of  other  manufacturers,  or  to  other  parties." 

USE  OF  BLACK  LIST  IN  EUROPE. 

Question  No.  7. 

"Is  it  lawful  for  a  single  manufacturer,  or  any  number  of 
them  acting  together,  to  issue  a  so-called  'black  list'  of  those 
dealers  who  cut  the  prices  fixed  by  one  or  all  of  such  manu- 
facturers, and  can  wholesale  dealers  legally  refuse  sales  to  parties 
named  on  such  list?" 

In  Great  Britain  there  is  no  specific  law  against  "black 
lists,"  but  anyone  claiming  to  be  injured  thereby  might  invoke 
the  general  libel  laws.  In  France  the  "black  list"  is  appar- 
ently seldom  used  in  business,  but  some  of  the  replies  from  that 
country  indicate  that  it  is  customary  for  manufacturers  to 
remove  from  their  list  of  agents  those  who  do  not  adhere  to 
agreements.  The  answers  from  Germany  show  that  a  "black 
list"  is  permissible,  and  that  supplies  may  be  refused  to  parties 
on  such  list,  excepting  medicinal  drugs,  etc.,  required  by  privi- 
leged apothecaries,  who  are  appointed  by  the  Government. 

Our  Consul  at  Liverpool,  England,  says: 

"The  best  information  that  I  have  been  able  to  secure  is 
to  the  effect  that  it  would  be  lawful  for  a  single  manufacturer,  or 
any  number  of  manufacturers  acting  together,  to  issue  a  so- 
called  'black  list'  of  those  dealers  who  cut  the  prices  fixed  by 
one  or  all  of  such  manufacturers,  and  that  wholesale  dealers 
could  legally  refuse  to  sell  to  parties  on  such  'black  list/  The 
'black  list/  however,  to  be  within  the  protection  of  the  law, 
would  have  to  be  issued  privately.  If  it  were  issued  publicly 
an  action  might  lie  for  damages  or  injury  to  trade  suffered  by 
the  parties  mentioned  on  such  list." 

From  our  Consul  at  Plymouth,  England : 

"There  is  no  law  forbidding  a  single  manufacturer,  or  any 
number  of  them  acting  together,  to  issue  a  so-called  'black 
list'  of  those  dealers  who  cut  the  prices  fixed  by  one  or  all  of 
such  manufacturers,  and  wholesale  dealers  can  legally  refuse  to 
sell  to  parties  named  on  such  list." 

Our  Consul  at  Edinburgh,  Scotland,  reports: 

3i3 


"It  is  not  unlawful  for  a  single  manufacturer,  or  any  num- 
ber of  them  acting  together,  to  issue  a  so-called  'black  list''  of 
those  dealers  who  cut  the  prices  fixed  by  one  or  all  of  such  man- 
ufacturers, and  wholesale  dealers  can  legally  refuse  sales  to 
parties  named  on  such  list." 

From  our  Consul  at  Belfast,  Ireland: 

"It  is  lawful  for  a  single  manufacturer,  or  a  combination  of 
manufacturers,  to  issue  a  'black  list,'  i.  e.,  a  list  of  those  dealers 
who  cut  the  prices  fixed.  Wholesale  dealers  can  legally  refuse 
to  sell  to  parties  named  in  said  list." 

Our  Consul-General  at  Paris,  France,  writes : 

"It  is  not  customary  in  France  for  manufacturers  or 
merchants  to  issue  formally  a  'black  list,'  but  if,  in  the  drug 
trade,  for  instance,  a  dealer  should  cut  prices  or  otherwise 
offend  the  manufacturer,  the  latter  would  or  could  refuse  to 
sell  further  to  such  dealer,  and  the  result  would  be  that  the 
dealer's  name  would  be  dropped  from  the  advertised  list  of 
those  authorized  by  the  manufacturer  to  sell  his  products." 

Our  Consul  at  Limoges,  France,  says: 

"It  is  lawful  for  manufacturers  to  give  out  to  wholesale 
dealers  a  list  of  dealers  who  cut  prices,  and  they  can  refuse  to 
sell  to  those  who  fail  in  their  agreements." 

From  our  Vice-Consul  General  at  Hamburg,  Germany: 

"In  Germany  a  manufacturer  of  proprietary  and  other 
articles  is  legally  permitted  to  refuse  sales  of  his  goods  to  a 
dealer  who  violates  the  prices  and  terms  of  other  manufac- 
turers. In  this  respect  so-called  'black  lists'  are  regularly 
circulated  among  the  members  of  associations,  and  the  issuing 
and  circulation  of  such  lists  is  entirely  lawful.  In  the  same 
manner  can  wholesale  dealers  legally  refuse  sales  to  parties 
named  on  such  lists,  and  frequent  use  is  made  of  such  privi- 
lege." 

Our  Vice-Consul  General  at  Frankfort,  Germany,  writes: 

"No  law  forbids  issuing  privately  a  so-called  'black  list'  of 
those  dealers  who  cut  the  prices  fixed  by  manufacturers;  whole- 
sale dealers  can  refuse  sales  to  parties  named  on  such  list  and 
other  parties." 

Our  Vice-Consul  at  Plauen,  Germany,  reports : 

"The  German  law  does  not  forbid  to  keep  or  issue  so- 
called  'black  list  of  dealers  who  cut  the  prices  fixed  by  one 
or  more  manufacturers,  and  these  or  wholesale  dealers  can  re- 

314 


fuse  sales  to  parties  named  in  such  lists,  excepting  medicinal 
drugs,  etc.,  required  by  privileged  apothecaries." 

GOVERNMENT     RELATIONS     TO     TRADE     ASSOCIATIONS     IN 

EUROPE. 

Question  No.  8. 

"Are  there  any  commissions  or  authorities  appointed  by 
the  Government  of  the  country  for  the  purpose  of  deciding 
whether  a  trade  combination  or  agreement  is  in  restraint  of 
trade,  or  illegal,  or  not?" 

These  Consular  reports  show  that  Great  Britain,  France 
and  Germany  have  never  undertaken  to  prevent  or  interfere 
with  proper  trade  agreements.  On  the  contrary,  the  widest 
latitude  seems  to  be  allowed  manufacturers  and  dealers,  among 
whom  numerous  combinations  exist,  especially  in  England  and 
Germany,  to  secure  the  maintenance  of  prices  and  terms. 

In  our  own  country,  however,  the  Sherman  Anti-Trust 
law  is  so  sweeping  that  it  makes  illegal  every  contract  or  com- 
bination in  restraint  of  trade.  Even  if  the  contract  or  agree- 
ment is  a  reasonable  one  and  does  not  menace  the  public  wel- 
fare in  any  way,  it  is  nevertheless  prohibited  by  this  law. 

As  a  matter  of  curiosity,  it  is  interesting  to  refer  to  a  "Cata- 
logue of  Drugs,  Medicines  and  Chemicals  sold  wholesale  and 
retail  by  Jacob  Schieffelin,  193  Pearl  street,  New  York,"  pub- 
lished more  than  100  years  ago.  This  old  price  list  was 
printed  in  1804,  and  it  bears  the  following  official  endorsement: 
"Examined  and  approved  by  the  New  York  Druggists'  Asso- 
ciation, New  York,  August  6,  1806.  By  order,  Henry  H. 
Schieffelin,  Secretary."  It  would  seem  that  it  was  entirely 
lawful  in  those  early  days  for  merchants  to  form  an  associa- 
tion and  agree  upon  the  prices  to  be  charged  by  its  members. 

There  is  a  pressing  need  of  Congressional  legislation  which 
will  make  it  lawful  to  enter  into  reasonable  and  proper  trade 
agreements,  for  without  such  agreements  it  is  difficult  to  meet 
the  complex  conditions  of  modern  business. 

I  therefore  urge  this  convention  to  petition  Congress  to 
amend  the  Sherman  law  so  as  to  make  its  provisions  apply  only 
to  agreements  and  contracts  which  are  in  unreasonable  re- 
straint of  trade. 

THE  CHAIRMAN :  In  spite  of  all  the  difficulties,  the  firm 
has  lasted  one  hundred  and  twenty-odd  years.       Before  calling 

3i5 


upon  Mr.  Herman  Ridder  to  close  to-day's  discussion,  I  will 
declare  the  floor  open  for  general  discussion  on  behalf  of  the 
merchants  and  manufacturers'  associations  here  represented.  We 
have  heard  from  the  Wholesale  Drug  Association.  I  understand 
that  we  have  with  us  the  representative  of  the  Retail  Drug  As- 
sociation, Mr.  Wooten,  to  whom  we  extend  the  privilege  of  the 
floor. 

MR.  THOMAS  V.  WOOTEN:  I  shall  only  take  a  few  mo- 
ments' time,  because  Mr.  Schieffelin,  as  a  representative  of  the 
wholesale  druggists,  has  so  completely  covered  the  ground  in 
reference  to  the  drug  trade ;  but  there  is  one  thing  about  which  I 
want  to  talk  that  will  impress  upon  you  the  importance  of  this 
discussion  to  the  retail  druggists.  About  fifteen  years  ago  we 
began  to  have  an  influx  into  the  drug  business  of  people  who 
were  not  druggists ;  people  who,  on  the  contrary,  were  specula- 
tive capitalists ;  people  who  wanted  to  sell  drugs,  the  conspicu- 
ous articles  of  the  drug  business,  at  a  phenomenally  low  profit  in 
order  to  create  the  impression  that  everything  in  their  store  was 
sold  at  as  much  less  than  its  real  value  as  50  or  60  per  cent.,  sell- 
ing a  bottle  of  patent  medicine  at  a  little  more  than  half  the  usual 
price  of  that  article.  At  that  time  our  business  began  to 
suffer,  and  it  has  gone  on  from  bad  to  worse,  until  the  condi- 
tion of  the  retail  drug  business  is  anything  but  satisfactory 
to-day.  Our  efforts  to  better  our  condition  brought  us  into 
contact  with  the  national  government  and  we  were  prosecuted 
as  part  of  the  drug  trust.  No  more  unjust  action  could  have 
been  conceived  or  carried  out. 

Now,  in  order  to  show  you  how  patent  medicines  are  used, 
the  retail  druggist  pays  for  these  articles  67  to  80  cents.  The 
wholesaler,  buying  them  at  best  prices,  pays  57  to  67  cents, 
something  like  that,  but  the  department  stores  sell  them  as  low 
as  49  cents.  You  know  how  that  is  done.  It  is  very  simple. 
The  actual  loss  is  charged  to  the  advertising  account,  and  it 
is  regarded  as  cheap  advertising  at  that.  But  what  becomes  of 
the  retail  druggist,  the  man  who  has  paid  67  or  80  cents  for 
it,  and  whose  expense  of  doing  business  is  25  per  cent,  of  his 
gross  receipts?  He  has  to  sell  that  article  at  $1,  or  else  at  an 
actual  loss,  and  when  he  tries  to  get  a  dollar  for  it  the  woman 
who  has  seen  the  49  cent  price  in  the  daily  paper  looks  upon 
the  druggist  as  a  highwayman,  and  treats  him  as  such,  because 
she  figures  out  that  the  department  store  makes  a  profit  at  49 

316 


cents.  That  illustrates  the  importance  of  this  discussion  to  our 
branch  of  business.  That  is  not  the  worst  of  it,  though,  Mr. 
Chairman.  The  prescription  business  has  suffered  likewise. 
The  department  stores,  and  some  of  these  syndicated  drug 
stores,  are  taking  prescriptions  that  have  been  filled  by  reputa- 
ble drug  stores  of  long  standing,  and  refilling  them  at  a  small 
fraction  of  their  actual  value,  in  order  to  create  the  impression 
that  everything  is  sold  at  that  phenomenally  low  price.  When 
you  take  a  new  prescription  in  there  you  get  an  entirely  dif- 
ferent story ;  they  charge  the  usual  price,  but  what  they  want 
to  do  is  create  the  impression  that  the  retail  druggist  in  the 
outlying  district  is  a  robber. 

W  e  have  been  trying  to  benefit  our  condition  by  having  a 
thorough  understanding  in  regard  to  prices.  Personally,  I 
do  not  think  the  retail  drug  business  can  be  carried  on  profita- 
bly or  satisfactorily  without  some  kind  of  tacit  agreement  as 
to  prices.  We  are  willing  in  our  line  of  business  to  submit  the 
question  of  profits  to  any  responsible  tribunal.  We  have  edu- 
cated ourselves  to  this  business.  Everything  about  this  busi- 
ness is  regulated  by  law.  First  of  all  we  are  required  to  prove 
to  some  responsible  tribunal  that  our  educational  acquirements 
fit  us  to  carry  on  this  business.  There  is  nothing  about  a  drug 
store  that  is  not  regulated  by  law  except  the  fact  that  the 
proprietor  is  not  allowed  to  talk  to  anybody  else  about  prices 
or  about  improving  his  condition  of  business.  If  he  does  he 
is  running  contrary  to  the  Sherman  Anti-Trust  law,  and  liable 
to  be  prosecuted,  and,  worst  of  all,  held  up  to  scorn  in  the 
public  press.  That  is  about  all  I  want  to  say,  because  I  think 
the  subject  has  been  covered ;  but  we  are  very  much  interested 
in  this,  and  we  want  the  law  repealed. 

THE  CHAIRMAN— Mr.  Ninde  has  asked  for  the  floor. 
Mr.  Ninde  represents  the  Retail  Furniture  Dealers'  Associa- 
tion. There  is  only  one  more  speaker  after  Mr.  Ninde,  who 
has  been  put  on  the  programme  for  a  five-minute  talk,  after 
which  the  floor  will  be  open  to  everybody. 

MR.  J.  NEWTON  NINDE:  Mr.  Chairman— The  question 
which  the  furniture  dealers  have  confronting  them  is  not  a  ques- 
tion of  price,  but  a  question  of  trade  ethics,  and  I  cannot  better 
illustrate  the  position  in  which  the  furniture  dealers  of  this  coun- 
try find  themselves  as  this  time  than  to  make  the  mere  statement 
of  fact. 

3i7 


Some  of  you  may  know  and  some  of  you  may  not  know  that  in 
the  cities  of  New  York,  Chicago  and  Grand  Rapids  there  has 
been  established  a  number  of  buildings  in  which  are  assembled, 
for  the  personal  inspection  at  the  hands  of  the  furniture  buyer 
and  the  retailer  of  furniture,  the  samples  of  the  factories  all 
over  this  country.  These  show  rooms  or  exhibition  buildings 
are  wholesale  show  rooms,  but  because  furniture  is  so  tempt- 
ing a  thing  to  the  average  woman  and  because  of  its  bulk  and 
the  necessary  fixed  charges  in  its  handling,  the  margin  of 
price  between  the  wholesaler  and  the  retailer  is  necessarily 
large.  These  wholesale  show  rooms,  it  was  soon  found,  be- 
came retail  establishments  into  which  curbstone  brokers, 
salesmen  and  others  who  carried  no  stock  were  bringing  the 
consumer  in  the  attempt  to  buy  goods  at  the  wholesale  price. 
The  individual  protest  of  the  buyers  was  registered  without 
effect;  and  so  about  four  years  ago  there  came  into  existence 
the  National  Retail  Furniture  Dealers'  Association,  made  up 
of  buyers  from  all  over  the  country.  They  convinced  the  man- 
agers of  these  buildings  and  the  exhibitors  that  it  was  but  just 
if  they  expected  their  patronage  they  should  protect  them 
in  their  legitimate  trade.  Strictly,  under  the  Sherman  Anti- 
Trust  law,  this  might  be  construed  in  restraint  of  trade;  but 
this  was  not  all.  There  were  other  centres  in  which  factories 
were  located,  and  the  breakfast  food  men  and  the  tobacco  trust 
and  the  soap  makers  were  all  using  furniture  to  aid  in  the  dis- 
tribution of  their  goods.  One  soap  house,  we  are  told,  gives 
away,  or  ostensibly  gives  away — for  we,  as  business  men, 
know  such  is  not  the  case — over  two  million  dollars  worth  of 
furniture  each  year.  In  the  city  of  Chicago  there  have  grown 
up  great  mail  order  houses  that  are  conveying  to  the  people 
in  the  country  the  same  impression  that  the  department  stores 
are  conveying  to  the  people  in  the  cities,  that  they  were  selling 
their  goods  for  so  much  lower  prices  that  the  retail  dealer  in 
the  country  generally  was  a  thief  and  a  robber.  More  than 
that  if  you  will  remember,  in  Mr.  Seth  Low's  address  yester- 
day morning  he  called  attention  to  the  fact  that  each  article 
imported  into  this  country,  whether  one,  ioo  or  1,000,  brought 
the  same  amount  of  duty.  The  mail  order  house  went  to  the 
weak  and  venal,  the  dishonest,  I  might  say,  manufacturer  and 
said  to  him,  "We  will  take  so  many  of  your  goods  if  you  will 
allow  us  a  discount  of  from  20  to  50  per  cent." ;  and  what  was 
the  result?    Certain  mail  order  houses  have  been  able  to  dis- 

318 


tribute  to  the  consumer,  although  their  expense  for  doing  bus- 
iness, we  find,  is  quite  as  great  as  that  of  the  merchant  in  the 
country,  goods  for  less  than  the  retailer  in  the  country  can  buy 
them  from  the  same  manufacturer  as  the  mail  order  house 
procures  them  from.  These  were  evils  which  threatened  to  ruin, 
not  only  the  retail  furniture  dealer,  because  these  same 
difficulties  are  present  particularly  in  the  West,  but  the  re- 
tailers in  all  lines ;  and  so  there  grew  up  twenty-three  State 
and  city  associations  throughout  this  country.  And  what  was 
the  result?  In  the  State  of  Oregon  there  have  been  organized 
several  associations  which  say  to  the  manufacturer  of  furniture: 
"If  you  will  protect  us  we  will  try  to  protect  you  and  confine 
our  trade  to  you." 

(Upon  motion,  the  time  of  the  speaker  was  extended  three 
minutes  longer.) 

An  active,  enterprising  man  commenced  proceedings  against  the 
furniture  manufacturers  and  retailers  of  Oregon  and  Washington 
and  California.  One  hundred  and  eighty  merchants  were  indicted, 
everybody  who  had  ever  belonged  to  an  association,  including 
many  men  who  were  out  of  business  and  men  who  were  dead, 
and  then,  to  make  a  mockery  of  the  thing,  these  men  were  quiet- 
ly given  to  understand  that  if  they  would  come  into  court  and 
plead  guilty  they  would  be  let  off  with  a  fine  of  ten  dollars. 
After  the  proceedings  had  begun,  because  some  of  us  have  had 
experience  with  lawyers,  we  thought  it  was  easier  to  pay  the  fine 
than  to  pay  the  lawyer — the  District  Attorney  glibly  remarked, 
"We  have  secured  enough  money  out  of  this  to  permit  us  to  pay 
our  expenses  in  the  proceedings." 

The  retail  furniture  dealers  in  this  country  and  the  merchants 
in  all  lines — for  there  are  hundreds  of  such  organizations  as 
ours — simply  want  a  privilege  to  gather  together  and  correct, 
as  far  as  possible,  these  abuses  and  be  in  a  position  to  say  to 
the  manufacturer,  "If  you  sell  me  you  must  not  sell  my  cus- 
tomer, and  you  must  not  destroy  my  business." 

THE  CHAIRMAN— The  third  representative  selected  by 
the  retail  merchants  to  state  their  case  is  Mr.  Charles  J.  Trax- 
ler,  of  Minneapolis,  who  represents  the  Retail  Lumber  Dealers' 
Association. 

Mr.  Charles  J.  Traxler. 

Mr.  Chairman — As  to  the  industrial  trusts  and  combinations,  let 
it  be  said  briefly  in  passing  that  experience  has  proven  that  not  all 

319 


trusts,  nor  all  combinations,  are  bad.  On  the  contrary,  some  of 
them  serve  a  most  useful  purpose  for  the  advancement  of  the  pub- 
lic good.  But  all  of  them,  whether  good  or  bad,  should  be  subject 
to  public  inspection  and  regulation  under  either  State  or  Federal 
authority;  where  the  scope  of  the  business  is  exclusively  within 
a  State,  then  under  State  authority;  where  interstate,  then  under 
the  Federal  authority. 

With  publicity,  with  a  standard  accounting  or  auditing  sys- 
tem, and  with  a  law  requiring  that  all  rates  or  charges  for  any 
commodity  of  general  public  use  or  utility  shall  at  all  times 
be  just  and  reasonable,  and  a  provision  for  investigation  and 
prosecution  similar  in  effect  to  that  herein  proposed  for  com- 
mon carriers,  the  menace  of  industrial  trusts  will  disappear. 

All  present  plans  for  dealing  with  these  powers  are  inefficient. 
Moreover  the  method  of  procedure  is  slow  and  unpro- 
ductive of  satisfactory  results.  It  is  of  small  consequence  what 
laws  are  on  our  statute  books  if  adequate  means  are  not  pro- 
vided for  producing  in  court  the  evidence  of  their  violation. 
No  plan  of  investigation  will  succeed  that  does  not  cast  the 
burden  of  proof  upon  the  party  having  possession  of  the  facts 
to  produce  them  in  court. 

Then  amend  the  Sherman  Anti-Trust  Act  to  make  the  gist 
of  the  offense,  not  the  agreeing  together,  but  the  actual  injury 
to  the  public,  so  that  the  constitutional  right  of  private  con- 
tract shall  indeed  be  inviolate  and  no  longer  a  crime  punish- 
able by  fine  and  imprisonment. 

What  the  American  people  want  is  such  laws  and  their  en- 
forcement as  will  safeguard  them  in  the  enjoyment  of  their 
equal  rights  and  equal  privileges  and  protect  them  against  the 
encroachments  of  the  rich  and  powerful. 

What  they  want,  and  should  have,  is  laws  that  will  control,  not 
destroy;  laws  that  will  regulate,  not  confiscate;  laws  that  will  give 
them  a  fair  share  of  the  benefits  of  aggregate  industrial  wealth 
under  private  ownership,  not  public  ownership. 

Probably  the  question  of  greatest  economic  significance 
touching  the  business  interests  of  this  country  in  the  present 
generation  is  that  of  Federal  regulation  of  industrial  trusts, 
common  carriers  engaged  in  the  carrying  traffic  which  consti- 
tutes interstate  commerce.  It  may  be  taken,  I  think,  as  the 
common  belief  that  some  definite  means  should  be  provided  by 
Congress  for  the  effectual  regulation  of  that  part  of  the  busi- 
ness of  common  carriers  to  the  end  that  all  classes  of  people 

320 


and  all  industries  shall  receive  equal  service  at  uniform  rates, 
and  that  industrial  trusts  should  be  so  regulated  that  they  shall 
no  longer  be  a  menace  to  the  public  welfare.  Let  us  consider 
first  the  railway  problem. 

POWER  OF  CONGRESS  TO  REGULATE  RAILROADS. 

That  Congress  has  the  power  to  regulate  interstate  com- 
merce is  so  well  settled  that  any  discussion  upon  that  point  in 
this  connection  seems  undesirable  and  unnecessary.  It  is  also 
agreed  that  the  interstate  traffic  of  railroads  as  common  car- 
riers is  interstate  commerce,  and  almost  all  recent  writers 
upon  that  subject  agree  that  in  the  exercise  of  the  right  to  reg- 
ulate interstate  commerce  Congress  has,  if  it  chooses  to  ex- 
ercise it,  the  legal  right  to  fix  the  rates  to  be  charged  by  com- 
mon carriers  for  that  part  of  their  business  which  has  to  do 
with  the  transportation  of  freight  and  passengers  between  the 
States,  or  between  the  States  and  foreign  countries.  This  plan 
may  be  passed  without  further  consideration  as  there  is  no 
one  at  present  advocating  its  adoption  on  account  of  its  ob- 
vious impracticability. 

CAN  CONGRESS  DELEGATE  ITS  POWER  TO  A  COMMISSION? 

There  is,  however,  a  great  diversity  of  opinion  as  to  whether 
Congress  may  lawfully  delegate  this  power  to  a  commission, 
and  if  Congress  may  delegate  it  at  all,  how  far  it  may  lawfully 
go  in  doing  so.  There  are  those  whose  opinions  are  entitled 
to  the  greatest  consideration  who  contend  that  Congress  has 
no  constitutional  authority  to  delegate  this  power  or  any  part 
of  it,  and  it  is  earnestly  contended  with  considerable  force  of 
argument  that  so  far  as  the  United  States  Supreme  Court  is  con- 
cerned, the  question  may  be  deemed  an  open  one.  A  noted  lawyer 
and  statesman,  who  has  recently  written  on  the  subject,  has  ex- 
pressed that  opinion.  He  says :  "There  are  dicta  by  judges  in 
various  cases  decided  by  the  Supreme  Court  to  the  effect  that 
Congress  may  regulate  rates  of  national  transportation,  either 
directly  or  by  a  commission.  In  other  cases,  the  point  has 
been  taken  for  granted.  But  an  examination  of  the  cases 
shows  that  whether  authorizing  a  commission  to  fix  rates  is 
or  is  not  a  delegation  of  legislative  power  which  Congress  is 
competent  to  make  has  never  been  the  ground  of  decision  in 
any  case,  and  presents  an  issue  which  has  never  been  thor- 

321 


oughly  discussed  either  by  the  bar  or  by  the  court."  There 
are  many  other  prominent  Americans  who  hold  the  same  view. 

There  can  be  no  doubt  of  the  paucity  of  judicial  expression, 
and  it  must  be  conceded  that  what  there  is  has  not  the  force 
and  is  not  entitled  to  the  weight  it  would  have  as  the  ground 
of  direct  decision  after  full  discussion.  There  is  one  opinion, 
however,  which  from  the  very  nature  of  the  case,  the  question 
of  how  the  matter  of  rates  might  be  disposed  of  by  Congress, 
must  have  been  the  subject  of  serious  consideration  by  the 
court.  I  refer  to  the  opinion  of  the  Supreme  Court  of  the 
United  States  in  the  Maximum  Rate  Case,  167  U.  S.  Rep.  479, 
from  which  the  previous  quotation  was  taken.  The  Court  said, 
"The  present  inquiry  is  limited  to  the  question  as  to  what  it 
(the  Interstate  Commerce  Act)  determined  should  be  done 
with  reference  to  the  matter  of  rates.  There  are  three  obvious 
and  dissimilar  courses  open  for  consideration.  Congress  might 
itself  prescribe  the  rate;  or  it  might  commit  to  some  subordin- 
ate tribunal  this  duty;  or  it  might  leave  with  the  company  the 
right  to  fix  rates,  subject  to  regulations  and  restrictions,  as  well 
as  to  the  rule  which  is  as  old  as  the  existence  of  common  car- 
riers, to  wit:  that  rates  must  be  reasonable." 

Aside  from  what  is  claimed  to  be  the  inherent  right  of  Con- 
gress to  delegate  this  power,  together  with  such  expressions 
of  the  Supreme  Court  as  have  been  made  on  the  subject,  there 
are  other  arguments  entitled  to  great  weight,  but  it  is  suffi- 
cient for  the  present  purpose  to  point  out  the  different  views 
held,  and  then  to  concede  the  right  of  Congress  to  name  future 
rates  indirectly  through  a  commission — which,  on  the  whole, 
seems  to  be  the  better  view,  though  it  is  not  so  clear  that  its 
exercise  would  be  either  wise  or  expedient. 

FIXING  RATES  IS  A  LEGISLATIVE  ACT. 

Passing  the  question  of  the  right  of  Congress  to  name  rates 
and  the  right  to  delegate  that  power  to  a  commission,  what, 
then,  will  be  the  effect  of  the  exercise  of  that  power?  It  is 
clear  that  if  Congress  has  this  power  and  may  exercise  the 
right  of  fixing  a  rate,  that  the  exercise  of  such  a  power  must 
be  a  legislative  act,  for  Congress  can  exercise  none  other  than 
legislative  functions.  Hence  it  follows  that  if  it  delegates  this 
power  to  a  commission  the  delegated  power  is  also  a  legisla- 
tive function.  If  the  rate  was  fixed  by  Congress  it  would  be 
by  the  enactment  into  law  of  a  bill  in  regular  form,  and  it 

322 


would  be  a  law  of  the  land  as  soon  as  it  became  operative,  the 
same  as  any  other  act  of  Congress.  Hence  it  seems  a  logical 
conclusion  that  if  Congress  enact  a  law  empowering  a  com- 
mission to  name  a  rate,  which  Congress  itself  might  do,  and 
such  commission,  having  due  authority  from  Congress  to 
name  a  rate  to  go  into  immediate  effect,  should  name  such  a 
rate,  which  should  go  into  immediate  effect,  does  it  not  at  once 
become  in  force  and  effect  a  law?  That  this  is  the  purpose  of 
the  present  law  seems  clear,  for  they  propose  a  penalty  be  pro- 
vided for  a  refusal  to  adopt  the  rate.  Such  a  rate  must  have 
both  the  force  and  effect  of  law  to  justify  setting  into  opera- 
tion any  provision  of  law  imposing  a  fine  or  penalty  for  a  vio- 
lation or  refusal  to  adopt  it,  and  if  it  has  not  the  force  and 
effect  of  law,  for  that  purpose  at  least,  how  then  can  a  carrier 
be  compelled  to  adopt  a  commission-made  rate  or  be  punished 
for  a  failure  or  refusal  to  adopt  it?  There  can  be  no  compul- 
sory adoption  without  a  fine  or  penalty,  and  there  can  be  no 
enforcement  of  a  penalty  without  a  violation  of  law.  If.  then 
a  commission-made  rate  has  the  force  and  effect  of  law  for 
this  purpose,  is  it  not  only  fair  and  just  that  it  should  have  the 
same  force  and  effect  for  all  purposes,  and  therefore  be  entitled 
to  be  treated  as  such? 

NO    LEGISLATIVE    POWER    IN    INTERSTATE    COMMERCE    COM- 
MISSION. 

I  am  not  unmindful  of  the  fact  that  it  is  claimed  that  the 
functions  of  the  commission  are  to  be  administrative  and  not 
legislative.  No  one  questions  the  authority  of  Congress  to 
empower  a  commission  to  do  administrative  and  detail  work, 
such  as  would  be  involved  in  fixing  the  actual  rates,  provided 
specific  rules  and  fixed  standards  are  prescribed  by  Congress 
in  accordance  with  which  the  work  is  to  be  done.  But  the 
power  asked  for  by  those  who  favor  the  giving  to  the  commis- 
sion power  to  name  a  rate,  either  absolute  minimum  or  maxi- 
mum, in  cases  where  the  commission  itself  has  determined  that 
a  rate  established  by  the  carrier  is  unjust,  unreasonable  or  dis- 
criminating, without  any  prescribed  standard  as  to  what  is  an 
unjust  or  unreasonable  rate  or  without  any  specific  rules  as  to 
how  they  may  be  determined,  would,  it  is  believed,  call  for  the 
exercise  of  a  discretion  which  is  purely  legislative  and  not  mere- 
ly administrative. 

The  United  States  Supreme  Court  in  Interstate  Commerce 

323 


Commission  vs.  Railway  Co.,  167  U.  S.  479,  says:  "The  power 
to  prescribe  a  tariff  of  rates  for  carriage  by  a  common  carrier 
is  a  legislative  and  not  an  administrative  or  judicial  function," 
and  a  power  to  fix  a  rate  to  take  the  place  of  one  condemned 
is  power  to  fix  all  rates  if  all  should  be  condemned,  hence 
power  to  fix  a  tariff  of  rates. 

The  same  court  in  the  Maximum  Rate  Case,  speaking  of  the 
powers  given  to  the  present  Interstate  Commerce  Commis- 
sion, also  says:  "The  power  given  is  partly  judicial,  partly  ex- 
ecutive and  partly  administrative,  but  not  legislative.  *  *  * 
Our  conclusion  then  is  that  Congress  has  not  conferred  upon 
the  Commission  the  legislative  power  of  prescribing  rates, 
either  Maximum,  Minimum  or  Absolute. " 

It  must  be  conceded,  however,  as  has  been  pointed  out  by 
the  U.  S.  Supreme  Court  in  Chicago  &  N.  W.  Ry.  Co.  vs. 
Dey,  35  Fed.  Rep.  866,  that  while  the  power  to  fix  rates  is 
legislative  "yet  the  line  of  demarcation  between  legislative  and 
administrative  functions  is  not  always  easily  discerned.  The 
one  runs  into  the  other."  However,  to  determine  whether  the 
act  of  fixing  the  rate  in  the  manner  called  for  by  the  Presi- 
dent's Message  be  purely  legislative  or  whether  it  be  both 
legislative  and  administrative  does  not  lessen  the  legal  compli- 
cations nor  simplify  the  solution  of  the  problem.  The  fact 
will  remain,  that  a  commission-made  rate  would  still  be  suf- 
ficiently legislative  in  its  character  to  have  the  force  and  effect 
of  law,  at  least  for  the  purposes  of  any  provision  designed  to 
enforce  its  observance. 

Another  interesting  feature  of  the  act,  which  seems  to  have 
been  intended  to  safeguard  the  interests  of  the  carrier,  is  the 
provision  by  which  it  is  proposed  to  make  a  commission-made 
rate  subject  to  review  by  the  courts. 

REVIEW  BY  COURTS  GIVES  LEGISLATIVE  POWER  TO  JUDICIARY. 

As  the  power  to  fix  rates  is  legislative,  Congress  cannot  con- 
fer that  power  upon  the  courts,  nor  can  it  confer  upon  them 
the  right  to  revise  commission-made  rates,  which  is  essential- 
ly the  same  thing.  Courts  may  inquire  whether  rates  made  by 
carriers,  which  have  been  collected,  are  reasonable  and  just, 
for  that  is  a  judicial  act,  but  courts  cannot  prescribe  future 
rates  to  be  charged  by  carriers,  for  that  is  a  legislative  act.  It 
does  not  help  the  matter  to  call  the  act  administrative,  for  the 
Supreme  Court  of  the  United  States  in  Reagan  vs.  Farmers' 

324 


Loan  and  Trust  Co.,  154  U.  S.  Rep.  397,  has  said:  "The  courts 
are  not  authorized  to  revise  or  change  the  body  of  the  rates  im- 
posed by  a  legislature  or  a  commission ;  they  do  not  determine 
whether  one  rate  is  preferable  to  another  or  what  under  all 
the  circumstances  would  be  fair  and  reasonable  as  between  the 
carrier  and  the  shipper;  they  do  not  engage  in  any  mere  ad- 
ministrative work."  If  the  courts  are  not  authorized  to  revise 
or  change  legislative  or  commission-made  rates  and  cannot  de- 
termine whether  one  rate  is  preferable  to  another,  nor  what 
under  all  the  circumstances  would  be  a  fair  and  reasonable 
rate,  between  the  carrier  and  the  shipper,  how,  then,  can  a 
commission-made  rate  be  reviewed  by  the  courts  ? 

As  we  have  seen,  a  commission-made  rate  is,  in  the  very 
nature  of  things,  a  law  as  soon  as  it  goes  into  effect,  and  being 
a  law  it  is  subject  to  interpretation  by  the  courts  as  any  other 
law.  It  may  be  amended  or  repealed  by  Congress,  but  unless 
it  is  unconstitutional  in  that  it  is  so  unreasonable  that  its  en- 
forcement would  deprive  the  carrier  of  a  fair  return  for  the  use 
of  its  property,  the  courts  cannot  interfere.  A  court  cannot 
question  its  expediency  or  propriety,  nor  substitute  its  opinion 
for  that  of  a  commission.  Courts  undoubtedly  have  the  right 
to  determine  whether  or  not  a  rate  made  by  a  carrier  is  rea- 
sonable or  just,  but  such  a  rate  is  essentially  different  from  a 
commission-made  rate;  the  former  is  always  subject  to  inves- 
tigation by  the  courts,  which  may  pass  upon  its  justness  and 
reasonableness  even  under  the  common  law,  and  they  may  re- 
strain its  collection  if  found  unjust  or  unreasonable.  The  latter 
is  a  law,  and  the  courts  cannot  pass  upon  the  reasonableness  or 
justness  of  a  law;  they  may  interpret  it  and  declare  what  it 
means,  but  they  cannot  alter  it  by  amendment  or  by  substitu- 
tion ;  and  if  it  does  not  conflict  with  the  Constitutional  provision 
and  operate  as  a  taking  of  property  without  due  process  of 
law,  it  must  stand  until  altered,  amended  or  repealed  by  Con- 
gress. In  support  of  this  view  is  the  statement  by  the  United 
States  Supreme  Court  in  M.  &  St.  L.  Ry.  Co.  vs.  Minnesota, 
186  U.  S.  Rep.  268.  The  court  said :  "The  action  of  the  Com- 
mission in  fixing  the  rate  complained  of  as  to  this  particular 
class  of  freight  has  not  been  shown  to  be  so  unjust  or  unrea- 
sonable as  to  amount  to  a  taking  of  property  without  due  proc- 
ess of  law."  And  upon  that  ground  the  court  declined  to  in- 
terfere with  the  action  of  the  Minnesota  Commission,  and  the 
rate  made  by  it  was  allowed  to  stand. 

32s 


Again,  the  act  of  determining  whether  a  rate  is  reasonable 
or  unreasonable,  or  whether  it  is  just  or  unjust,  is  a  judicial 
function,  and  its  exercise  should  involve  all  the  formality  im- 
plied by  the  Constitution,  which  declares  that  "no  person  shall 
be  deprived  of  life,  liberty  or  property  without  due  process  of 
law"  Such  powers  should  be  jealously  guarded;  they  should 
not  be  exercised  except  by  courts,  and  by  courts  only  after 
hearing  the  parties  and  all  the  evidence  that  can  be  adduced. 

No  special  point,  however,  is  made  here  against  the  granting 
of  judicial  powers  to  a  commission,  provided  judicial  powers 
only  be  granted;  but,  as  we  have  seen,  the  rate-making  power 
is  a  legislative  function — or  possibly  administrative  and  legis- 
lative— and  to  combine  the  two  functions  with  the  legislative 
function  into  one  body  would  be  to  invite  the  consequences 
of  combining  the  functions  of  the  independent  departments  of 
government.  The  framers  of  our  Constitution,  profiting  by 
the  lessons  of  history,  and  the  experience  of  the  mother  coun- 
try, created  three  co-ordinate,  though  independent,  branches 
in  our  national  system  as  the  most  perfect  model  for  a  demo- 
cratic form  of  government.  Our  own  national  experience  has 
shown  that  a  strict  observance  of  the  lines  of  demarcation 
drawn  by  the  framers  of  our  Constitution  between  these  three 
independent  and  co-ordinate  branches  is  vital  to  the  very  ex- 
istence of  government  itself.  Any  line  of  conduct  or  any  pro- 
posed legislation  that  does  not  maintain  with  strictest  integ- 
rity these  lines  of  demarcation,  to  the  end  that  neither  shall 
invade  the  other,  unhesitatingly  and  uncompromisingly,  de- 
serves to  be  condemned. 

DEFECTS  OF  RATES  MADE  BY  LEGISLATURES. 

What  I  have  said  against  the  advisability  of  commission- 
made  rates  does  not  apply  with  equal  force  to  legislature-made 
rates,  but  such  rates  have  their  own  inherent  weaknesses  and 
objections.  A  maximum  legislative  rate,  fixed  by  a  State  or  a 
nation  to  apply  with  equal  force  to  all  classes  of  railroads  with- 
in its  jurisdiction  under  all  the  various  circumstances  and  con- 
ditions which  may  obtain,  is  more  apt  to  operate  to  the  detri- 
ment of  the  public  than  otherwise. 

The  natural  and  logical  tendency  of  such  a  law  is  to  benefit 
the  stronger  roads  against  the  weaker,  those  having  a  terri- 
torial advantage  either  as  to  the  directness  of  its  route  or  as 
to  the  population  of  the  country  through  which  it  passes  or  as 

326 


to  the  quantity,  quality  and  value  of  freight  handled  as  against 
those  less  favored.  This  effectually,  though  indirectly,  drives 
out  of  the  field  the  weaker  roads  and  thus  eventually  establishes 
a  monopoly  of  the  business  for  the  stronger  roads.  This  must 
be  true  unless  the  rate  fixed  by  law  is  high  enough  to  permit 
the  weakest  road  to  make  a  fair  profit  on  its  business,  in  which 
case  it  would  be  so  high  that  it  would  not  operate  as  a  re- 
straint upon  the  stronger  roads,  and  hence  be  of  no  public  ben- 
efit, to  say  nothing  of  the  tendency  to  interfere  with  proper 
Federal  regulation. 

I,  therefore,  oppose  any  fixed,  inelastic,  legislative  or  com- 
mission-made rate  which  must  stand,  whether  just  or  unjust, 
till  declared  unconstitutional  by  a  court  of  competent  jurisdic- 
tion or  repealed  by  legislative  action. 

CARRIERS  SHOULD  MAKE  THEIR  OWN  RATES. 

I  should  rather  favor  leaving  the  rate  making  in  the  hands 
of  the  carriers,  subject,  however,  to  legislative  or  Congressional 
regulation  within  the  meaning  of  the  phrase  "to  regulate  com- 
merce" in  the  "so-called"  commerce  clause  of  the  Federal  Con- 
stitution. If  that  can  be  rightfully  construed  to  mean  "to  con- 
trol," then  subject  to  Congressional  control. 

This  may  be  done  by  some  substantial  amendments  and  ad- 
ditions to  the  present  commerce  act,  and  I  make  bold  to  offer 
a  few  suggestions. 

There  are  well-informed  and  well-intentioned  men  of  na- 
tional prominence  who  advocate  the  creation  of  a  special  tri- 
bunal for  the  trial  of  cases  arising  under  this  act,  on  the  theory 
that  such  a  plan  would  make  it  possible  to  secure  experts  as 
judges  of  such  courts.  The  advantage  of  expert  judges  is  con- 
ceded, though  it  is  not  believed  to  be  greater  in  such  a  court 
than  in  any  other  court.  Then  there  is  a  well-grounded  belief 
that  the  creation  of  a  special  tribunal  for  a  specific  industry 
would  be  an  innovation  inimical  to  our  free  institutions  and 
contrary  to  the  spirit  of  our  Government,  to  say  nothing  of  the 
greater  possibilities  for  the  use  of  corrupting  influences. 

LET  COURTS  PASS  UPON  REASONABLENESS  OF  RATES. 

A  better  plan,  it  is  believed,  is  to  vest  in  the  U.  S.  Circuit 
Courts  complete  jurisdiction  in  such  matters  and  provide  for 
the  appointment  of  referees  after   the   manner   of   referees    in 

327 


bankruptcy.  Vest  the  referees  with  all  the  powers  of  the  court 
in  all  matters  relating  to  compulsory  attendance  of  witnesses 
and  the  compulsory  production  of  all  forms  of  evidence ;  also 
with  power  to  take  the  testimony,  to  try  the  cause,  and  to  find 
the  facts.  The  reason  for  the  provision  for  the  appointment  of 
referees  is  two-fold.  It  enables  the  court  to  handle  the  busi- 
ness without  increasing  the  number  of  judges,  and  it  also 
makes  it  possible  to  secure  the  services  of  men  as  referees  who 
are  experts  or  specialists  in  transportation  matters. 

Then  vest  a  commission  with  power  to  investigate,  arbitrate 
or  prosecute  all  complaints,  and  to  initiate  proceedings  in  the 
courts  having  jurisdiction  in  the  district  or  circuit  in  which  the 
cause  of  complaint  arose,  on  its  own  motion  or  at  the  request 
of  a  complaining  party  or  parties,  either  in  its  own  name,  in 
the  name  of  the  Government  or  in  the  name  of  the  complain- 
ing party  or  parties,  by  complaint  or  petition  in  the  nature  of 
a  petition  in  equity,  setting  out  in  general  terms  the  facts  upon 
which  reliance  is  had  to  establish  their  cause,  with  a  prayer  for 
the  relief  demanded,  and,  when  the  action  is  in  the  name  or  on 
behalf  of  a  party  claiming  damages,  let  the  prayer  for  relief 
include  a  demand  for  damages  claimed. 

Provide  that  when  a  prima  facie  case  has  been  stated  in  the 
complaint  or  petition,  the  offending  carrier  or  carriers  shall  be 
cited  to  appear  before  the  referee  or  the  court,  upon  proper 
notice,  and  show  cause,  if  any  there  be,  why  the  relief  de- 
manded should  not  be  granted  by  the  court.  In  case  of  failure 
or  refusal  to  appear,  let  judgment  be  entered  as  of  default. 
The  same  result  might  be  obtained  by  information  in  the 
nature  of  quo  warranto,  the  purpose  of  which  should  be  to  ob- 
tain a  judicial  declaration  and  enforcement  of  existing  rights, 
and  not  to  create  or  destroy  them. 

This  provision  operates  to  shift  the  burden  of  proof  upon 
the  carriers  to  justify  the  act  complained  of  instead  of  impos- 
ing the  almost  impossible  task  upon  the  commission  or  other 
complainant  to  produce  evidence  which  is  peculiarly  within 
the  knowledge  and  control  of  the  carriers.  It  will  also  go  far 
toward  overcoming  difficulties  heretofore  encountered  in  se- 
curing evidence,  for,  it  will  be  seen,  if  the  carriers  do  not  them- 
selves furnish  satisfactory  evidence  to  sustain  the  legality  of 
their  conduct,  they  must  suffer  the  penalty  of  law.  It  imposes 
no  hardships  upon  the  carriers,  for  if  any  acts  or  omissions 
complained  of  are  in  fact  lawful,  they  of  all  others  are  in  the 

328 


best  position  to  furnish  the  evidence  to  establish  their  legality 
in  the  shortest  possible  time  and  with  the  least  expense.  The 
carriers  may  say  that  this  plan  reverses  the  usual  course  of 
trial  by  requiring  them  to  prove  themselves  innocent  before 
they  have  been  proven  guilty.  Railroad  companies,  being 
purely  creatures  of  law,  have  no  rights  except  such  as  are 
given  under  the  law  by  which  they  are  created.  They  have  no 
natural  rights,  such  as  the  natural  rights  of  individuals.  The 
rule  of  criminal  law  that  a  man's  innocence  must  be  presumed 
until  he  has  been  proven  guilty  does  not  apply.  The  American 
people  owe  the  railroad  companies  no  presumption  of  inno- 
cence, but  the  railroads  do  owe  the  American  people  evidence 
of  good  faith,  and  of  full  compliance  with  law.  It  is  their  duty, 
and  it  should  be  the  law  that  they  should  prove  themselves  free 
of  guilt. 

METHODS  OF  FACILITATING  PROCEDURE. 

There  should  be  a  provision  also  requiring  referees  to  file 
their  reports  within  a  reasonable  time — say  thirty  days  after 
the  close  of  the  hearing;  also  that  the  cause  may  be  brought 
before  the  court,  in  term  or  in  chambers,  by  either  party  on 
motion  for  judgment  on  twenty  days'  notice  at  any  time 
after  the  filing  of  the  report  and  findings  of  the  referees. 
The  court  should  pass  upon  all  questions  of  law,  but  the  find- 
ings of  fact  of  the  referees  should  be  subject  to  review  of  the 
court  on  the  ground  that  they  are  not  supported  by  the  evi- 
dence, and  on  that  ground  only.  The  judgment  which  should 
be  rendered  by  the  court,  or  by  any  judge  thereof,  either  in 
term  or  at  chambers,  should  include  damages  to  the  complain- 
ant, where  damages  have  been  shown,  and;  where  necessary, 
injunctions  or  restraining  orders  should  be  issued  restrain- 
ing a  repetition  of  the  act  or  acts  which  have  been  found  to  be 
unlawful;  such  order  to  remain  in  force  until  the  further  order 
of  the  court. 

The  reason  for  the  provision  making  the  restraining  order 
subject  to  the  further  order  of  the  court  is  to  make  the  order 
elastic  and  adjustable  to  changing  conditions.  It  will  enable 
the  court  to  change  or  modify  its  order  of  injunction  whenever 
it  shall  be  made  to  appear  to  the  court,  upon  proper  and  for- 
mal application  with  notice  to  the  commission,  that  the  condi- 
tions have  changed  so  that  the  act  complained  of  would  be  no 
longer  unlawful. 

329 


In  all  cases  where  a  rate  or  line  of  conduct  has  been  found 
unlawful  by  the  court,  and  the  carrier  fixes  a  new  rate  and  es- 
tablishes a  new  line  of  conduct  to  take  the  place  of  that  con- 
demned by  the  court,  which  new  rate  is  also  deemed  unlawful 
by  the  commission,  the  matter  should  be  brought  before  the 
court  on  an  order  to  show  cause,  without  further  evidence,  and 
summarily  determined. 

In  all  cases  either  party  should  have  the  same  rights  of  ap- 
peal from  the  judgment  of  the  court  on  questions  of  law  alone, 
as  are  now  provided  for  other  litigants,  but  no  appeal  should 
operate  to  supersede  or  suspend  the  judgment  of  the  trial  court. 

Proceedings  on  behalf  of  the  commission  or  of  other  com- 
plainants that  shall  be  conducted  under  the  direction  of  the 
commission  should  be  conducted  by  counsel  furnished  by  the 
Government,  and  the  commission  should  have  the  right  to  call 
for  legal  assistance  upon  the  Attorney-General  of  the  United 
States  or  upon  any  United  States  District  Attorney,  and  upon 
application  they  should  be  supplied  by  special  counsel  to  be 
appointed  by  the  courts,  and  all  costs  of  prosecution  should  be 
borne  by  the  Government. 

The  reason  for  requiring  expenses  to  be  paid  by  the  Govern- 
ment is  to  enable  the  small  shipper  or  receiver  of  freight  to 
have  a  hearing,  and  to  secure  to  the  poor  man  equal  rights  with 
the  rich  man  in  fact  as  well  as  in  theory.  There  is  also  the  fur- 
ther reason  that  in  most  cases  these  complaints  would  involve 
the  rights  of  numerous  localities,  thousands  of  shippers  and 
millions  of  rates.  Rare  indeed  would  be  the  cases  where  only 
the  rights  of  a  single  individual  or  a  single  rate  is  involved. 
The  proceeding,  in  its  very  nature,  is  for  the  public  good,  and 
hence  should  be  on  behalf  of  the  public  and  at  the  public  ex- 
pense. 

Some  such  plan,  it  is  believed,  will  avoid  all  legal  and  consti- 
tutional complications  which  must  necessarily  be  encountered 
by  any  plan  which  gives  the  rate-making  power  to  a  commis- 
sion, whether  that  power  be  the  power  to  fix  an  absolute  or  a 
maximum  rate.  It  eliminates  all  questions  as  to  the  combina- 
tion of  legislative,  executive  and  judicial  powers  in  one  body. 
It  neither  vests  the  commission  with  any  purely  executive 
functions,  nor  with  the  legislative  power  to  fix  the  rate,  nor 
with  the  judicial  power  to  enforce  a  law.  It  makes  of  the  com- 
mission in  truth  and  in  fact  a  purely  "administrative  body."  It 
shifts  the  burden  of  proof  upon  the  carrier,  and  at  the  same 

330 


time  leaves  the  commission  and  all  other  persons  interested 
free  to  exercise  all  the  powers  granted  by  law  for  producing 
all  the  evidence  obtainable,  thus  making  it  to  the  interest  of  all 
parties  to  join  in  furnishing  the  facts,  instead  of  offering  a  re- 
ward for  duplicity  or  furnishing  an  incentive  for  concealing 
evidence  or  procrastinating  the  final  trial  of  the  case. 

It  avoids  the  creation  of  a  special  tribunal  for  a  specific  in- 
dustry, and  rests  upon  the  honesty  and  integrity  of  our  estab- 
lished courts,  thus  saving  the  expense  and  delay  of  experi- 
mental practice  before  an  untried  tribunal.  And  when  it  is 
known  that  about  48  per  cent,  of  all  questions  determined  by 
Appellate  Courts  are  determined  upon  questions  of  practice 
alone,  this  is  no  small  consideration. 

It  is  believed  that  legislation  along  the  line  suggested  will 
furnish  a  direct,  speedy  and  effective  scheme  for  regulating 
and  controlling  the  conduct  of  our  carriers;  make  it  possible 
for  all  classes  of  people  to  have  equal  rights  and  equal  oppor- 
tunities in  the  enjoyment  of  traffic  facilities,  and  secure  prompt 
and  substantial  justice  under  its  provisions,  while  at  the  same 
time  it  will  leave  the  matter  of  rate  making  in  the  hands  of  the 
carriers,  where  it  naturally  and  logically  belongs,  and  will  not 
transgress  any  other  of  their  vested  rights. 

THE  CHAIRMAN:  The  floor  is  now  open  for  discussion 
of  this  question  from  the  practical  business  man's  standpoint. 

MR.  HENRY  OTHMER  (Representing  the  Wholesale 
Saddlery  Association  of  the  United  States.)  Mr.  Chairman: — 
During  the  past  two  days  I  have  listened  with  a  great  deal  of 
interest  to  the  able  addresses  presented  by  the  professors  of 
law  and  learning,  and  I  am  satisfied  that  men  engaged  in  trade 
and  commerce  have  nothing  to  fear,  so  long  as  we  continue 
to  have  a  plentiful  crop  of  legal  advisors  to  point  out  the  way 
to  success,  as  well  as  to  assist  us  in  getting  out  of  trouble, 
when  we  happen  to  be  unfortunate  enough  to  run  up  against 
the  "buzz  saw."  I  am  also  satisfied  that  the  average  politician, 
who  represents  us  in  State  and  nation,  will  be  only  too  glad  to 
listen  to  our  troubles  before  election  day,  and  conveniently 
forget  them  the  day  after. 

The  association  I  have  the  honor  to  represent  is  composed 
of  jobbers  and  manufacturing  jobbers,  and  the  keenest  compe- 
tition exists  between  members.  Never  in  the  history  of  our  as- 
sociation has  any  attempt  been  made  by  the  members  to  regu- 
late or  fix  prices,  and  it  is  the  policy  of  our  association  to  pro- 

33i 


mote  trade  and  commerce  in  the  time-honored  and  regular 
channels,  namely,  through  sales  of  goods  by  the  manufacturer 
to  the  jobber,  by  the  jobber  to  the  retailer,  and  by  the  retailer 
to  the  consumer,  thus  maintaining  the  stability  of  business  and 
contributing  to  the  prosperity  of  all  in  their  respective  sta- 
tions. 

The  general  tendency  to  eliminate  the  middleman  from  the 
channels  of  trade  has  made  trade  organization  a  necessity,  and 
the  business  interests  of  the  country  have  come  to  realize  the 
fact  that  co-operation  has  taken  the  place  of  competition  as 
the  life  of  trade. 

The  jobber  is  the  natural  distributor  from  the  manufacturer 
to  the  retail  dealer,  and  it  is  a  question  whether  jobbers'  or- 
ganizations which  provide  reasonable  rules  and  regulations 
to  maintain  long  established  trade  customs,  will  not  be  con- 
strued as  conspiracies  in  restraint  of  trade  and  in  violation  of 
the  Sherman  act  at  this  time,  when  public  opinion  places  asso- 
ciations organized  to  promote  trade  and  commerce,  in  the 
same  class  with  the  trusts,  which  are  monopolistic  in  their  ten- 
dencies. 

The  jobber  is  being  harassed  on  one  side  by  the  manufac- 
turer selling  direct  to  the  consumer,  and  on  the  other  by  the 
retailer,  who  sues  because  jobbers'  associations  try  to  keep 
him  in  regular  trade  channels,  and  while  the  jobber  and  the  re- 
tailer have  many  interests  in  common,  the  elimination  of  either 
jobber  or  retailer  from  the  channels  of  trade  can  only  be  con- 
strued as  a  step  in  the  direction  of  monopoly,  and  it  seems 
that  it  might  be  wise,  inasmuch  as  the  Sherman  act  was  de- 
vised to  prevent  monopoly,  yet  does  not  clearly  define  the 
status  of  the  jobber  or  retailer,  that  it  be  amended  in  such  a 
way  as  will  give  the  jobber  and  the  retailer  their  proper  place 
in  the  distribution  of  trade. 

The  Sherman  law,  as  now  construed,  places  the  legitimate 
business  interests  of  the  country  in  jeopardy,  and  in  my  opinion 
all  associations  engaged  in  trade  and  commerce  should  be  in- 
terested in  having  the  Sherman  act  amended  in  such  a  way  as 
will  clearly  define  the  status  of  the  jobber  and  the  retailer,  as 
their  position  under  the  law  is   critical  and  uncertain. 

THE  CHAIRMAN:  The  floor  is  open  for  further  discus- 
sion. 

MR.  MARUM  (Oklahoma)  :  Mr.  Chairman — I  represent  on 
this  floor  neither  the  manufacturers,  the  wholesalers  nor  the  re- 

332 


tailers.  I  represent  a  larger  constituency,  the  consumers.  Our 
worthy  chairman  knows  the  difference  between  those  different 
classes  in  our  old  city,  so  I  will  not  explain  it  here.  I  am  not  in- 
terested in  the  prices  of  furniture  or  lumber.  In  Oklahoma,  if 
the  lumber  is  too  high,  we  can  erect  sod  houses,  and  if  the  furni- 
ture is  too  high  we  can  do  without  it;  but  when  it  comes  to  the 
drugs  it  is  a  different  proposition. 

A  few  years  ago  we  had  a  calamity  that  prevailed  in  our 
part  of  the  United  States,  but  the  Government  of  the 
United  States  came  to  our  rescue  and  furnished  free  vac- 
cine to  prevent  black  leg  in  the  cattle.  Every  manufacturing 
druggist  that  had  his  patent  on  that  medicine  rushed  to  Con- 
gress with  petitions  asking  the  Government  not  to  come  to  the 
relief  of  a  poor  people.  But  that  was  without  effect.  There 
is  a  greater  question  that  has  come  up  that  interests  all  of  us 
in  Oklahoma.  We  have  prohibition  in  that  State,  and  the 
only  way  we  can  get  that  medicine  is  by  prescription.  I  do 
not  want  to  see  a  combination  of  doctors  to  fix  the  price  of 
prescriptions ;  neither  do  I  want  to  see  a  combination  of  dis- 
pensaries fixing  the  price  of  the  medicine. 

If  the  trust  is  an  organization  doing  Interstate  Commerce 
that  part  of  its  business  should  be  under  the  supervision  of 
the  Federal  Government.  All  else  should  be  under  the  super- 
vision of  the  State. 

Since  coming  to  Chicago  I  hear  many  things  that  seem 
strange  to  a  person  living  in  a  State  whose  motto  is :  "Let  the 
People  Rule." 

I  hear  distinguished  speakers  say  that  words  are  not  to  be 
construed  in  the  ordinary  language  in  which  they  were  written, 
but  that  every  word  in  the  Constitution  of  the  United  States 
has  a  hidden  meaning  and  that  the  Supreme  Court  of  the 
United  States  can  be  depended  upon  to  render  any  decision  re- 
quired to  extend  the  power  and  the  jurisdiction  of  the  Con- 
gress of  the  United  States.  This  statement  is  not  a  fact  and 
is  not  borne  out  by  the  decisions  of  the  Supreme  Court  of  the 
United  States. 

It  will  not  do  at  this  time  to  say  that  the  great  decisions  ren- 
dered prior  to  the  Civil  War  are  not  to  be  considered  in  de- 
fining the  powers  of  Congress — that  all  such  decisions  were 
wiped  out  at  Appomatox.  This  is  not  a  fact.  We  do  not  need 
to  go  back  to  the  great  case  of  Permoli  vs.  the  Municipality, 
rendered  in  1845.    They  then  told  the  people  of  Louisiana  that 

333 


if  they  wanted  Civil  and  Religious  Liberty  they  must  look  to 
the  Constitution  of  their  own  State.  That  Civil  and  Religious 
Liberties  were  not  one  of  the  rights  guaranteed  by  the  Con- 
stitution. In  the  recent  case  decided  during  the  last  term  of 
the  Supreme  Court,  Justice  Brewer  rendered  the  opinion  in 
Kansas  vs.  Colorado,  and  in  passing  upon  the  petition  of  in- 
tervention of  the  United  States  says,  when  dismissing  said  pe- 
tition, as  follows : 

"When  this  Government  was  formed  it  was  a  new  Govern- 
ment. It  did  not  succeed  the  powers  of  any  other  Govern- 
ment that  ever  existed.  It  was  a  Government  of  limited  pow- 
ers, such  as  were  granted  it,  either  by  express  words  or  by  im- 
plication in  the  Constitution  of  the  United  States.  That  each 
State  then  created,  or  that  would  be  thereafter  created,  with 
equal  powers  of  the  original  thirteen  States,  succeeded  to  all 
the  powers  that  were  embraced  in  the  English  Parliament. 
That  the  judicial  power  was  handed  down  by  the  people  in  the 
Constitution  of  the  United  States  without  limitation,  or  with- 
out restriction,  and  that  Congress  only  had  such  powers  as 
were  granted  it  by  the  Constitution,  and  that  the  power  to 
expend  money  for  the  reclamation  of  arid  lands  was  not  one 
of  the  powers  given  them  either  expressly  or  by  implication 
in  the  Constitution,  and  that  the  petitions  for  intervention  in 
this  case  would  be  denied. 

Reasoning  for  this  decision,  holding  illegal  the  most  bene- 
ficial act  of  Congress,  an  act  that  would  provide  homes  for 
millions  of  people,  was  that  at  the  time  of  the  adoption  of  the 
Constitution  there  were  no  such  conditions  existing  as  arid 
lands  within  the  confines  of  the  United  States,  and  hence  the 
wildest  stretch  of  imagination  could  not  include  within  that 
grant  the  right  to  reclaim  such  arid  lands. 

Apply  this  reasoning  to  trusts  and  monopolies  that  did  not 
exist  at  that  time,  and  where  do  we  stand  and  in  what  posi- 
tion must  we  appear  when  we  ask  that  the  Supreme  Court  of 
the  United  States  read  into  our  Constitution  amendments 
that  could  only  be  placed  there  by  the  sovereign  power  of  our 
nation — that  is,  the  people  of  the  United  States? 

Let  us  go  back  to  the  first  principles.  I  am  willing,  if 
necessary,  to  give  to  the  Government  of  the  United  States  all 
power  to  control  and  manage  trusts  and  corporations,  but  it 
must  be  done  in  the  proper  manner  by  an  amendment  to  the 
Constitution. 

334 


I  am  opposed  to  taking  away  from  the  States  their  police 
power  of  regulating  the  interstate  matters  and  placing  them 
in  a  jurisdiction  whose  actions'  are  slow,  burdensome  and 
not  such  actions  as  are  endorsed  by  the  people  of  the  various 
States. 

For  twelve  years  Oklahoma  was  appealing  to  the  Inter- 
state Commission  for  redress  against  transportation  companies. 
It  took  twelve  years  for  that  ponderous  body  to  send  to  Okla- 
homa a  single  representative  to  investigate,  and  then,  upon 
hasty  examination,  said  that  the  transporation  companies,  in 
twelve  years,  had  stolen  from  the  people  of  Oklahoma  fifty- 
five  million  dollars,  but  they  failed  to  show  any  way  by  which 
that  money  could  be  recovered.  In  other  words,  before  as 
cumbersome  a  body  as  the  Interstate  Commerce  Commission 
is  can  act  or  order  the  refund  for  the  people,  the  statute  of 
limitation  will  have  expired,  the  stolen  money  will  have  been 
spent,  and  many  of  the  persons  from  whom  it  was  stolen  will 
be  dead  and  their  estates  settled  in  the  Probate  Courts. 

Many  words  are  spoken  in  condemnation  of  the  thefts'  and 
monopolies  in  the  United  States,  but  not  one  word  has  been 
said  regarding  restitution  to  the  people  from  whom  the  vast 
sums  of  money  have  been  stolen.  Any  law  that  will  permit 
the  thief  to  retain  the  stolen  goods  is  not  very  beneficial  to 
the  people  of  the  United  States.  What  cares  the  multimillion- 
aire what  laws  are  passed  in  the  future  regarding  the  trusts 
and  monopolies  if  he  is  allowed  to  get  away  with  the  billions 
of  money  that  he  and  his  associates  have  wrongfully  taken 
from  the  people?  Our  laws  to  be  of  any  use  must  provide  to 
follow  up  in  the  hands  of  the  possessor  the  funds  taken  for 
his  own  use  by  the  trustee,  who  represents  the  investors  in  the 
great  industrial  enterprises  of  the  United  States.  Why  pun- 
ish the  bank  clerk  who  steals  a  few  thousand  dollars  and  give 
the  "immunity  bath"  to  the  millionaire  who  steals  millions? 
If  you  catch  the  burglar  with  the  stolen  silver  in  his  posses- 
sion you  take  it  from  him  and  restore  it  to  the  rightful  owner. 
Why  not  do  the  same  thing  with  the  vast  sums  of  money  that, 
during  the  past  forty  years,  have  been  taken  from  the  millions 
of  people? 

The  impossibility  of  the  distribution  of  these  funds  may  be 
appalling,  but  if  you  make  your  fines  heavy  enough  this  money 
will  be  turned  into  the  Treasury  of  the  United  States  for  the 
benefit  of  all  the  people. 

335 


Before  "Dr.  Interstate  Commerce  Commission"  can  arrive 
at  the  bedside  of  the  sick  patient  the  patient  will  be  dead  and 
will  not  require  the  medical  attendance.  Rather  give  us  the 
quick  action  of  the  country  physician  in  each  State,  who  is  on 
the  ground  and  can  provide  the  remedy  before  the  patient  is 
dead. 

MR.  STEBBINS  (Minnesota)  :  Mr.  Chairman— I  did  not  ex- 
pect to  say  a  word  upon  this  floor,  but  I  represent  the  National 
Retail  Hardware  Men  of  the  United  States  of  America,  and  I 
want  to  say  that  while  we  have  not  had  our  bear  killed  yet  by  other 
people,  yet  we  have  had  our  difficulties,  with  only  one  experience, 
however,  in  the  courts,  and  that  happened  in  South  Dakota 
against  the  editor  of  the  Commercial  News  and  against  the 
South  Dakota  Hardware  Association.  It  was  brought,  of 
course,  under  the  Sherman  Act,  and,  supposedly,  we  were 
acting  in  restraint  of  trade.  The  judge,  however,  decided  in 
our  favor.  The  conditions  were  something  like  this :  The 
Commercial  News  had  urged  manufacturers  and  jobbers  to 
refrain  from  selling  certain  mail-order  houses,  or,  in  other 
words,  to  keep  the  trade  in  legitimate  channels,  and  the  Hard- 
ware Association  of  South  Dakota  had  contended  for  the 
same  thing,  but  there  was  no  effort  of  any  combination ;  there 
had  been  no  signed  agreement,  and  Judge  Garland,  of  that 
court,  said  that  a  hardware  dealer  had  the  right  to  purchase 
of  whom  he  chose,  and  the  manufacturer  and  the  jobber  had 
the  right  to  dispose  of  his  products  to  whom  he  chose.  So 
that  settled  the  question  so  far  as  the  law  was  concerned.  But 
we  are  in  the  same  position  as  the  other  retailers  who  have 
spoken  upon  the  floor  before  me,  that  we  are  liable,  by  rea- 
son of  the  action  of  some  lawyer  who  has  not  the  standing 
of  those  who  have  spoken  to  us  at  this  session,  entering  a 
suit  against  us,  and  we  being  compelled  to  defend  ourselves 
in  court,  as  we  were  in  South  Dakota.  We  are  simply  organ- 
ized for  the  purpose  of  trying  to  protect  the  little  towns  and 
villages  throughout  the  length  and  breadth  of  this  land,  which 
are  the  life  blood  of  this  nation.  We  believe  that  if  we  go 
on  and  allow  these  mail-order  houses  to  misrepresent  their 
goods,  to  make  false  statements,  to  try  and  belittle  the  honest 
merchants  throughout  the  towns,  that  we  will  soon  have  the 
grass  growing  in  the  streets  of  those  towns,  and  it  will  be  to 
the  detriment  of  the  commerce  of  this  country. 

MR.  J.  E.  DEFEBAUGH:     Mr.  Chairman— I  only  rise  to 

336 


cite  a  concrete  case  of  the  difficulties  the  business  men  are 
now  encountering,  in  view  of  the  activities  of  the  law  and  the 
attempts  that  are  being  made  to  enforce  it.  The  yellow  pine 
manufacturers  of  the  South  are  to-day  powerless  to  save  some 
of  their  number,  at  least,  from  bankruptcy,  and  others  from 
great  confusion,  because  it  is  impossible,  by  any  coherent  ac- 
tion, to  lessen  production  and  put  themselves  in  position  to 
maintain  labor  and  their  families  in  the  communities  they 
have  built  up  continuously  throughout  this  winter.  There  is 
a  large  overproduction,  and  the  members  of  the  fraternity 
have  been  charged  with  being  a  trust,  which  is  not  a  fact,  and 
which  Mr.  Smith,  who  spoke  to  us  this  morning,  will  be  able 
to  demonstrate  very  shortly;  but  the  threat  has  been  heard 
throughout  the  country  and  through  the  press  that  this  lum- 
ber fraternity  is  about  to  be  put  into  prison  for  conducting  a 
lumber  trust.  Now,  in  the  face  of  their  present  difficulties,  a 
large  overproduction,  they  are  not  able  to  write  a  letter, 
scarcely,  suggesting  the  lessening  of  production,  or  to  meet 
together  to  consider  the  subject,  without  being  in  danger  and 
their  interests  hurt.  All  the  theories  we  may  discuss  will  not 
help  the  situation  until  we  ask  Congress  to  modify  that  law 
and  allow  reasonable,  beneficient  combinations  not  in  re- 
straint of  trade. 

What  should  be  done  can  be  done.  This,  I  believe,  is  al- 
most an  axiom  in  practical  affairs.  There  are  recognized  evils 
in  our  social  organization  which  ought  to  be  eradicated  with- 
out, at  the  same  time,  destroying  influences  of  recognized 
good. 

In  this  endeavor  to  abolish  the  evils  of  business  combina- 
tions we  abolish  the  combinations  themselves,  and  so  wipe 
out  the  good  in  them — good  which  can  be  arrived  at  in  no 
other  way  than  by  combination. 

In  practical  affairs  we  often  find  a  business  organization 
used  for  social  purposes,  and  the  resources  and  organization 
of  the  individual  business  men  utilized  for  the  benefit  of  his 
employes.  I  have  known  sawmills  to  be  run  for  months  at 
a  heavy  loss,  when  to  shut  down  would  have  been  cheaper, 
simply  that  the  men  employed  might  earn  a  wage  and  that 
their  families  might  have  bread  and  butter. 

The  Sherman  law  declares  illegal  every  combination  for 
restraint  of  trade,  and  declares  every  person  who  shall  engage  in 

337 


any  such  combination  guilty  of  a  misdemeanor,  punishable 
by  fine  or  imprisonment,  or  both. 

It  assumes  that  the  restraint  of  trade  is,  per  se,  wrongful. 

This  I  deny,  and  I  also  deny  that  because  most  combina- 
tions in  restraint  of  trade  may  be  harmful  to  the  interests  of 
the  people  at  large,  that,  therefore,  in  order  to  avoid  harm- 
ful combinations,  those  that  are  harmless  or  even  beneficent 
should  be  forbidden. 

The  so-called  law  of  supply  and  demand  has  been  set  up  as 
a  fetish  by  many  theorists,  who  have  sacrificed  to  it  life  and 
the  means  of  life. 

Its  unrestricted  operation  regulates  by  destroying.  The 
fact  that  one  line  of  business  is  overdone  it  would  teach  only 
through  loss  and  suffering;  yet  the  wise  men  tell  us  that  we 
should  learn  from  the  experience  of  others  as  well  as  from 
our  own. 

But  if  we  seek  to  gain  this  knowledge  and  act  accordingly, 
if  we  associate  ourselves  together  to  learn  certain  facts  relating 
to  our  business,  and  come  to  an  agreement  as  to  what  these 
facts  signify,  and  then  proceed  to  apply  the  knowledge  thus 
gained,  we  are  accused  of  forming  an  illegal  combination,  and 
are  threatened  with  punishment  under  the  law. 

If,  instead  of  waiting  for  insolvency  to  overtake  us,  thus  by 
personal  experience  demonstrating  the  facts  of  the  situation, 
we  discover  that  we,  in  a  certain  line  of  business,  are  making 
more  goods  than  can  be  sold  at  a  profitable  price,  and  agree 
to  reduce  our  product  to  the  measure  of  demand,  we  are 
charged  with  violation  of  the  law. 

Common  sense  is  paralyzed ;  exercise  of  the  desire  for 
knowledge  and  the  disposition  to  benefit  by  it  are  condemned. 

The  law  would  have  us  go  back  to  the  commercial  dark 
ages,  when  business  was  veritably  a  warfare,  and  when  failure 
and  extortionate  profit,  panic  and  insane  prosperity  succeeded 
each  other  in  a  whirlwind  of  conditions,  out  of  which  perma- 
nent success  could  be  achieved  only  by  the  unscrupulous  or 
the  exceptionally  strong. 

I  am  particularly  familiar  with  the  lumber  business.  This 
is  one  of  the  great  industries  of  our  country  and  touches  vital- 
ly as  many  of  our  population  as  probably  any  other.  The 
farmer  who  complains  of  the  price  he  has  to  pay  for  his  lum- 
ber gets  an  enhanced  price  for  his  products,  because  of  the 
demand  of  this  industry,  even  if  he  does  not  sell  directly  to  the 

338 


lumber  camp,  the  sawmill  boarding  house  or  the  employes  of 
his  lumber  yard.  While  the  lumber  business  supplies  him 
with  material  for  his  stable,  it  also  pays  a  fancy  price  for  a 
horse  of  particular  type  he  may  raise. 

This  business  is  a  peculiar  one  in  some  respects,  for  it  is 
more  individualized  than  most  and  less  susceptible  of  effective 
combination.  With  20,000  sawmills  drawing  their  supplies  of 
timber  from  500,000  different  owners,  and  shipping  and  dis- 
tributing their  products  through  100,000  independent  dealers, 
it  has  furnished  a  problem  too  great  for  the  builder  of  com- 
binations and  trusts. 

There  have  been,  and  are,  some  small  or  local  combinations 
in  the  lumber  business  which,  on  a  limited  scale  or  within  a 
narrow  territory,  have  been  of  some  effect;  but  I  speak  where- 
of I  know  when  I  say  that  there  has  never  been,  in  the  his- 
tory of  the  lumber  business  of  the  United  States,  any  effective 
combination  embracing  any  considerable  percentage  of  the 
business  of  covering  any  wide  extent  of  territory  but  what 
has  been  ephemeral. 

So  thoroughly  have  they  been  taught  by  experience — for 
they  have  tried  all  the  recipes  for  combination  making — that 
lumbermen  have  given  over  hope  of  ever  achieving  the  usual 
objects  of  trusts  and  combinations,  namely,  steady  control  of 
production  and  prices,  and  content  themselves  with  small  or 
temporary  organizations,  some  of  which  are  now  declared  un- 
lawful. 

Nevertheless  the  lumber  business  faces  problems,  not  only 
of  vital  importance  to  itself,  but  of  interest  to  the  entire  coun- 
try, which  nothing  but  combination  can  solve. 

One  of  these  is  the  occasional  appearance  of  overproduction. 

Such  a  condition  is  at  hand  in  the  South  to-day.  The  mills 
are  established,  they  have  gathered  around  them  their  em- 
ployes, and  they  must  run  or  the  owner  will  suffer  serious  loss 
and  his  employes  be  deprived  of  their  means  of  livelihood. 

Most  of  the  sawmills  of  the  United  States,  particularly  in 
the  South,  are  remote  from  centres  of  population  and  of  labor 
supply.  A  lumberman  buys  a  tract  of  timber,  and  in,  or  as 
near  as  possible  to,  that  tract  he  builds  his  mill  and  the  houses 
for  his  prospective  employes,  and  gradually  gathers  around 
him  and  trains  an  efficient  working  force.  Men  go  there  with 
their  families  to  live. 

To  shut  down  the  mill  means,  so  far  as  the  employer  is  con- 

339 


cerned,  the  loss  of  the  efforts  of  months,  the  loss  of  the  in- 
terest on  his  investment,  the  loss  of  his  trade  connections;  and 
to  his  employes  it  means  the  loss  of  their  livelihood  and  com- 
pels removal  to  other  places  where,  perchance,  labor  can  be 
secured,  though  the  conditions  which  confront  their  employer 
they  are  likely  to  find  everywhere  else  within  their  own  par- 
ticular line  of  employment. 

The  employer  and  the  employed  are  alike  agreed  that  under 
such  circumstances  it  is  the  proper  thing  not  to  stop  opera- 
tion entirely,  but  to  continue  at  work  on  shorter  hours  or  less 
days  in  the  week,  on  the  theory  that  a  half  a  loaf  is  better  than 
no  bread. 

But  the  individual  operator  cannot  do  this  alone.  He  can- 
not shut  down  while  others  run.  He  cannot  even  restrict  his 
output  while  others  maintain  theirs. 

To  attempt  such  independent  action  creates  a  financial  prob- 
lem which,  in    its  working  out,  means  ruin  to  him. 

The  inevitable  and  only  solution  then  is  to  combine  with 
his  fellow  operators — those  operating  under  similar  conditions 
and  producing  the  same  kind  of  product  and  seeking  the  same 
markets — and  to  agree  on  a  uniform  measure  of  reduction,  and 
as  a  safeguard  against  selfishness  to  make  that  agreement  as 
binding  as  possible. 

Yet  this,  we  are  told,  the  law  does  not  permit;  and  for 
fear  of  the  Sherman  Act  such  action  recognized  in  the  pres- 
ent emergency  as  wise,  and  even  unselfish — wise  from  both  an 
economic  and  social  standpoint,  and  unselfish  in  that  it  has 
as  much  regard  for  the  welfare  of  the  employes  as  the  em- 
ployers— cannot  be  undertaken. 

Do  you  object  that,  if  combinations  in  such  an  emergency, 
with  such  good  motives  and  toward  such  a  desirable  end,  are 
permitted,  that  combinations  for  selfish  ends  and  to  the  dam- 
age of  the  people  must  be  permitted  and  would  be  effected? 

Right  there  is  where  I  call  upon  the  legal  talent  of  this 
country  to  devise  some  law  that  will  permit  these  good  things 
to  be  done  while  forbidding  and  preventing  the  formation  and 
existence  of  evil  and  economically  harmful  combinations. 

Those  of  you  who  are  lawyers  will  probably  tell  me  that  the 
law  can  take  no  account  of  motives,  but  simply  of  acts  and 
their  results ;  that  for  the  public  good  a  condition  which 
ordinarily  results  in  evil  must  be  forbidden,  although  some- 
times it  may  result  in  good. 

340 


I  admit  my  own  perplexity,  but  when  I  see  that  certain  acts 
in  restriction  of  trade  are  necessary  for  the  welfare  of  individ- 
uals, of  large  classes  of  the  population  and  of  the  country  at 
large,  I  insist  that  such  acts  should  not  be  forbidden,  that  re- 
straint of  trade  to  that  extent  should  be  permitted,  that  the 
law  should  be  framed  so  as  to  permit  them,  and  that  it  can 
be  so  framed. 

Are  these  acts  forbidden?  I  have  referred  in  the  above  to 
the  claims  that  they  are,  and  to  the  fear  of  lumbermen,  felt 
by  men  in  other  lines  of  business  also,  that  they  may  be  so 
declared.  I  would  protest  against  this  uncertainty  and  de- 
mand that  the  laws  not  only  permit  the  desirable  combination 
for  good  purposes  that  I  have  spoken  of  above,  but  that  they 
may  be  made  so  clear  that  there  will  be  no  chance  for  reason- 
able doubt  as  to  their  intent  and  effect. 

It  is  difficult  to  adjust  business  methods  to  the  rapid  changes 
in  the  laws  governing  them. 

Not  long  ago  things  were  a  matter  of  course  that  are  now 
illegal.  With  such  rapid  changes  in  the  letter  of  the  law  it  is 
difficult  to  know  what  is  or  is  not  lawful  to  do.  What  was 
proper,  and  even  laudable,  a  decade  ago  is  criminal  now.  The 
difficulty  is  increased  by  the  fact  that  the  law  is  not  always 
apparent  in  the  statute,  but  is  read  into  it  by  court  decisions, 
and  is  post  facto  to  the  extent  that  the  letter  of  the  law  ap- 
parent to  the  laymen,  by  which  he  endeavors  to  govern  him- 
self, may  be  almost  entirely  changed  by  interpretation,  so  that 
what  he  conscientiously  believes  to-day  to  be  legal  may  to- 
morrow be  declared  illegal,  and  bring  upon  the  involuntary 
delinquent  the  specified  penalty  for  his  unconscious  violation. 

There  may  be  exceptions,  but  I  feel  myself  warranted  in 
saying  that  the  average  lumberman  is  anxious  to  obey  the 
law,  to  fulfill  its  spirit  as  well  as  its  letter,  provided  he  can  find 
out  what  it  is. 

But,  having  been  taught  that  the  law  is  codified  common 
sense,  he  is  apt  to  be  misled  on  this  very  point,  for,  when  com- 
mon sense  tells  him  that  a  thing  is  right  and  his  investiga- 
tions fail  to  reveal  that  it  is  in  violation  of  the  letter  of  the 
law,  he  proceeds  in  his  chosen  policy,  to  find  in  some  cases 
that  he  is,  in  spite  of  himself,  a  law  breaker. 

It  ought  not  to  be  possible  for  this  to  happen.  The  law- 
should  be  so  clear  than  any  honest  man  of  ordinary  intelli- 
gence should  not  be  thus  misled. 

341 


I  wish  to  point  out  also  certain  inequalities  of  law  as  be- 
tween classes.  Congress,  in  1886,  adopted  an  act  to  legalize 
the  incorporation  of  national  trades  unions,  in  which  the 
legal  and  beneficent  objects  of  such  organizations  included 
"the  regulation  of  their  wages  and  their  hours  and  conditions 
of  labor."  This  act  implies  the  right  of  a  certain  class  of  the 
citizenship  to  form  combinations  for  the  regulation  of  the 
price  of  its  commodity.  Such  a  regulation  would  seem  to  the 
layman  to  be  in  restraint  of  trade  of  that  commodity. 

I  do  not  argue  in  this  case  against  the  labor  union,  nor  the 
equitable  right  of  its  members  to  seek,  through  these  organi- 
zations, a  reasonable  reward  for  their  labor.  But  I  would 
urge  the  widespread  recognition  of  their  rights,  accorded  also 
in  national  legislation,  as  another  reason  why  combinations 
of  other  business  men  for  reasonable  and  useful  ends  should 
be  given  equal  recognition;  otherwise  the  laws  are  not  equal. 

Equality  in  the  eyes  of  the  law  is  a  basic  principle  of  our 
system  of  jurisprudence.  It  seems  to  me  to  be  flagrantly 
violated  in  our  statutes  relating  to  combinations  in  restraint 
of  trade. 

THE  CHAIRMAN:  Mr.  S.  W.  Campbell,  of  Chicago, 
representing  the  Western  Association  of  Shoe  Wholesalers, 
has  something  to  offer. 

MR.  S.  W.  CAMPBELL  (Chicago):  If  there  is  no  one  else 
to  speak  in  this  open  discussion,  I  have  some  resolutions  I  want 
to  offer. 

THE  CHAIRMAN:  Will  you  read  your  resolutions,  Mr. 
Campbell? 

MR.  CAMPBELL:  The  resolutions  are  as  follows: 
Whereas,  The  rapid  development  of  the  trade  and  commerce 
of  the  nation  has  made  it  a  necessity  that  representatives  of 
various  industries  and  lines  of  trade  should  organize  them- 
selves into  associations  for  mutual  information  and  protection 
in  the  correction  of  trade  abuses. 

Under  the  present  interpretation  of  the  Sherman  Anti-Trust 
Law  and  the  anti-trust  laws  of  some  of  the  States  this  cannot  be 
done  without  the  participants  laying  themselves  liable  to  fine 
and  imprisonment,  or  both.  Various  decisions  of  the  Federal 
courts  and  of  the  State  courts  have  sustained  the  validity  of 
these  laws,  but  minority  opinions  of  some  of  these  same  courts 
indicate  that  there  is   a  difference  as  to  what  constitutes  an 

342 


agreement  that  amounts  to  a  conspiracy  and  an  agreement 
that  will  protect  the  parties  thereto  from  unbridled  competition. 

Believing  that  such  differences  can  be  incorporated  into 
amendments  to  these  laws,  the  adoption  of  the  following  res- 
olutions is  earnestly  requested : 

Resolved,  That  the  interpretation  of  the  anti-trust  laws 
of  the  nation  and  of  some  of  the  States  is  detrimental  to  the 
business  interests  of  the  country,  and  that  such  laws  tend  to  stifle 
and  prevent  organization  and  co-operation  in  the  form  of 
trade  associations,  which  seek'  only  to  preserve  the  commer- 
cial, economic  and  ethical  existence  of  their  members  in  the 
face  of  the  efforts  of  powerful  and  selfish  monopolies  to  grad- 
ually eliminate  the  individual  dealer. 

'Resolved,  That  if  the  proper  legal  construction  of  such 
anti-trust  laws  embodies  a  prohibition  of  co-operation  among 
business  men,  said  laws  are  fundamentally  wrong  in  their  con- 
ception, enactment  and  operative  effects,  and  therefore  require 
amendment. 

Resolved,  That  this  body,  in  convention  assembled,  earnest- 
ly request  that  the  next  coming  Congress  so  amend  the  Sher- 
man law  as  to  permit  those  engaged  in  legitimate  trade  to 
adopt  ways  and  means  for  protecting  themselves  from  com- 
petition and  trade  abuses  calculated  to  ruin  their  business. 
And  that  such  amendments  be  so  constructed  as  to  require 
the  greatest  publicity  to  all  the  acts  of  trade  organizations  of 
every  kind. 

THE  CHAIRMAN:  Gentlemen,  the  afternoon  session  will 
begin  at  2:30  sharp,  and  at  4  o'clock  the  floor  will  again  be 
thrown  open  for  discussion.  The  time  has  now  been  con- 
sumed and  we  have  now  to  listen  to  a  very  interesting  address 
by  the  closing  speaker  of  this  morning. 

MR.  G.  W.  PERKINS  (Illinois) :  Mr.  Chairman,  I  ask  leave 
to  introduce  a  resolution. 

THE  CHAIRMAN:  The  resolution  will  be  handed  to  the 
Committee  on  Resolutions. 

Mr.  G.  W.  Perkins  then  offered  and  read  the  following  res- 
olution : 

Resolved,  That  the  Sherman  Anti-Trust  Taw  and  the  Inter- 
state Commerce  Law  should  be  amended  so  as  to  preclude 
any  direct  or  indirect  application  of  those  laws  to  the  organi- 

343 


zations,  associations  or  unions  of  wage  earners  organized 
primarily  to  protect  the  wages,  hours  and  conditions  of  em- 
ployment of  such  wage  earners. 

THE  CHAIRMAN:  Are  there  any  other  resolutions  to  be 
presented  here? 

MR.  GEORGE  W.  LATTIMER  (Ohio):  Mr.  Chairman, 
being  a  delegate  appointed  by  the  Governor  of  Ohio,  I  have 
been  requested  to  read  this  resolution,  which,  I  believe,  has 
been  agreed  upon  by  several  of  the  State  delegations. 

Mr.  Lattimer  then  offered  and  read  the  following  resolution : 

Resolved,  That  it  is  the  sense  of  the  delegates  to  this  con- 
ference, appointed  by  Governors  of  States  and  commercial 
bodies,  that  the  people  and  the  Legislatures  of  the  several 
States  be  urged  to  exercise  a  wise  caution  and  conservatism 
in  the  enactment  of  State  legislation  for  the  regulation  of  in- 
dustries and  commerce. 

THE  CHAIRMAN:  Gentlemen,  I  now  take  pleasure  in 
introducing  to  you  Mr.  Herman  Ridder,  president  of  the 
American  Newspaper  Publishers'  Association,  who  will  ad- 
dress you  upon  the  subject,  ''Newspapers,  Their  Relation  to 
the  Paper  Trust  and  the  Labor  Trust." 

Mr.  Herman  Ridder. 

Mr.  Chairman — It  is  not  my  purpose  to  tire  you  out  by 
reading  a  long  paper,  but  the  paper  which  I  will  read  to  you 
has  been  prepared  in  a  condensed  form,  and  as  it  is  one  of 
the  objects  of  our  efforts  to  have  the  department  indict  these 
people  criminally,  and  as  we  purpose  to  take  action  at  the  next 
session  of  Congress,  I  feel  that  I  must  follow  the  copy,  which 
I  will  do  as  rapidly  as  possible.  This  situation  certainly  ap- 
pears serious  in  the  aspect  in  which  I  will  put  it  to  you. 

MAGNITUDE  OF  PUBLISHING  BUSINESS. 

Government  reports  upon  the  condition  of  the  printing  and 
publishing  business,  as  it  was  two  years  ago,  show  that  it  was 
the  only  large  manufacturing  industry  which  tended  toward 
diffusion  and  away  from  consolidation  or  concentration.  In  the 
previous  five  years  it  had  grown  in  greater  proportion  than  any 
other  industry,  and  it  had  taken  first  place  among  all  the  in- 
dustries of  the  country  in  the  number  of  establishments.     Fur- 

344 


thermore,  the  number  of  printing  establishments  had  shown  a 
greater  increase  in  the  five  years  from  1900  to  1905  than  in  the 
previous  ten  years.  Then,  too,  the  per  capita  value  of  printing 
and  publishing  products  had  increased  in  greater  proportion 
than  those  of  any  other  industry.  In  fact,  only  three  other  in- 
dustries had  shown  an  absolute  increase  in  products  greater 
than  that  of  the  printing  and  publishing  business.  These  facts 
become  important  and  significant  in  any  discussion  dealing  with 
the  effects  of  combinations  or  trusts  upon  industrial  progress. 

Since  those  reports  were  compiled,  the  printing  and  publish- 
ing interest  has  been  menaced  and  beset  at  every  point  by  op- 
pressive combinations.  The  cost  of  every  article  that  it  uses, 
including  labor,  has  been  subjected  to  an  artificial  stimulation, 
and  it  is  doubtful  if  the  splendid  contrast  that  was  then  made  by 
that  unprotected  industry  with  the  coddled  favorites  of  the 
tariff  or  with  the  trusteed  industries,  can  now  be  maintained. 

The  leading  manufacturing  industries  of  the  United  States 
in  1905  ranked  as  follows: 

First — Slaughtering  and  meat  packing. 

Second — Iron  and  steel. 

Third — Foundries  and  machine  shops. 

Fourth — Flour  and  grist  mills. 

Fifth— Clothing. 

Sixth — Lumber  and  timber. 

Seventh — Printing  and  publishing. 

Eighth — Cotton  manufactures. 

Ninth — Woolen  manufactures. 

Tenth — Boots  and  Shoes. 

The  printing  and  publishing  interests  then  represented  an  an- 
nual product  of  one-half  billion  dollars,  of  which  six  cities  con- 
tributed a  quarter  billion,  and  New  York  City  alone  contributed 
almost  one-quarter  of  the  great  total.  There  were  two  great 
divisions  of  this  vast  business — book  and  job  printing  constitut- 
ing one  class,  newspapers  and  periodicals  the  other  class — the 
latter  contributing  over  three-fifths  of  the  output. 

It  is  for  the  newspaper  especially  that  I  propose  to  speak. 
The  newspapers  and  periodicals  had  a  reported  capital  invested 
of  two  hundred  and  thirty-nine  million  dollars  ($239,000,000), 
of  which  nearly  one  hundred  millions  ($100,000,000)  represented 
machinery,  tools  and  implements.  They  paid  salaries  and  wages 
amounting  to  one  hundred  and  six  million  dollars  ($106,000,000) 
per  annum  to  160,000  workers.     They  paid  fifty-eight  million 

345 


dollars  ($58,000,000)  per  annum  for  their  principal  article  of 
use — white  paper.  They  represented  the  intellectual  growth  of 
the  country;  they  expressed  its  desires. 

Yet  so  scrupulous  were  they  in  the  subordination  of  their 
own  and  immediate  interests  to  those  of  the  varying  constit- 
uencies which  they  represented,  that  they  submitted  without 
material  protest  to  exactions  and  oppressions  which  no  other 
interest  would  have  tolerated.  While  all  others  were  consoli- 
dating and  planning  to  enrich  themselves  at  the  general  ex- 
pense, the  publishing  interests  were  maintaining  a  competition 
that  reduced  their  subscription  prices  to  the  lowest  limit.  The 
newspapers  of  the  country  that  reached  the  minimum  in  price 
had  increased  their  average  size  from  5  7-10  pages  in  1890  to 
85-10  pages  in  1905.  They  improved  their  product  and  ex- 
tended their  scope  until  the  circulation  of  the  daily  newspaper 
averaged  one  copy  per  day  to  every  four  of  the  entire  popula- 
tion of  the  country.  But  all  the  benefits  arising  from  the  in- 
troduction of  type-setting  machines,  the  perfection  of  the  print- 
ing press  and  the  cheapening  of  the  cost  of  white  paper  by  the 
use  of  mechanically  ground  wood  and  the  improvement  of  fast- 
running  paper-making  machinery,  were  given  to  the  public.  In 
New  York  City,  for  instance,  90  per  cent,  of  the  total  news- 
paper circulation  is  on  the  one-cent  basis,  and  this  percentage 
will  apply  in  many  parts  of  the  country. 

NEWSPAPERS    GIVE    MORE    AND  BETTER    SERVICE    AT    LESS 

PRICE. 

Within  the  five  years  from  1900  to  1905,  capital  to  the  extent 
of  forty-seven  million  dollars  ($47,000,000)  had  been  added  to 
the  investment  for  newspapers  and  periodicals;  but  the  product 
per  thousand  dollars  ($1,000)  invested  had  declined  from  $1,409 
in  1900  to  $1,288  in  1905.  During  that  period  the  mechanical 
cost  of  output  had  increased  about  30  per  cent.  For  many 
newspapers  the  increase  in  size  and  the  increase  in  circulation 
had  not  been  attended  by  corresponding  increase  in  profit.  The 
tendency  toward  concentration  and  consolidation  in  every  other 
direction  has  increased  the  cost  of  every  article  supplied  to  the 
newspaper,  though  it  receives  less  than  formerly  for  the  article 
itself.  Considering  the  care  and  attention  and  energy  and  abil- 
ity bestowed  upon  it,  the  newspaper  percentage  of  profit  is  less 
than  that  of  any  other  manufacturing  enterprise.  Speaking 
generally,  the  newspapers  have  encountered  large  increases  in 

346 


cost  of  production  and  enormous  decreases  in  earning  power 
with  cuts  in  prices  and  cuts  in  advertising  rates.  To  meet  com- 
petition and  save  themselves,  some  of  them  have  reduced  their 
prices  in  sheer  despair.  The  competition  between  themselves 
and  the  increases  in  output  had  been  maintained  to  the  ad- 
vantage of  the  employee — not  of  the  employer.  This  vast  man- 
ufacturing industry,  representing  a  greater  number  of  estab- 
lishments than  any  other  one  industry,  thus  finds  itself  the  only 
one  that  is  refused  the  protection  of  the  Government.  Unlike 
all  the  others,  it  has  reached  a  point  where  it  cannot  readily 
pass  along  its  burden  to  its  customers,  and  it  cannot  restore  the 
conditions  which  prevailed  prior  to  the  time  when  it  gave  away- 
all  of  its  gains  and  improved  facilities  to  the  public.  More  than 
that,  it  is  loaded  with  the  burdens  arising  from  the  protection 
of  every  interest  with  which  it  deals.  Every  machine  that  the 
publishers  buy — and  they  have  over  one  hundred  million  dol- 
lars invested  in  machinery — has  a  tariff  on  it  whereby  the  man- 
ufacturer taxes  them  unduly.  Every  ounce  of  paper  they  buy 
has  a  protective  tariff  behind  it  to  maintain  prices.  In  New 
York  City  and  elsewhere,  the  morning  papers  sell  practically 
all  of  their  product  to  a  combination  known  as  the  American 
News  Company.  The  newspapers  obtain  all  their  telegraphic 
news  from  a  combination.  They  buy  their  type-setting  machin- 
ery from  the  Mergenthaler  Linotype  Company.  They  buy  their 
advertising  type  from  a  company  formed  by  a  combination  of 
type  foundries.  In  some  cities  they  are  confronted  by  com- 
binations of  advertisers  which  mark  down  the  price  per  line 
that  the  newspapers  can  obtain  for  their  advertising  space.  Sub- 
stantially every  mechanic  whom  they  employ  is  protected  by  a 
self-constituted  tariff  in  the  form  of  a  labor  union,  and  to  that 
species  of  combination  they  are  paying  the  largest  amount  of 
tribute. 

NEWSPAPERS  AND  THE  LABOR  UNIONS. 

It  should  be  understood  that  the  American  Newspaper  Pub- 
lishers' Association  is  a  voluntary  organization  of  278  news- 
papers located  in  141  cities.  It  has  no  power  to  compel  any 
member  to  act  outside  of  his  own  volition.  Its  national  agree- 
ments with  labor  organizations  are  not  labor  contracts.  They 
simply  provide  a  way  by  which  each  individual  publisher  may 
secure  arbitration  without  interruption  to  his  business,  the  na- 
tional labor  organizations  guaranteeing  the  performance  of  all 

347 


the  contracts  made  by  the  local  unions  under  their  jurisdiction. 
In  other  words,  the  national  organizations  underwrite  local 
agreements.  These  agreements  have  stood  the  practical  test 
of  time  and  of  wide  application  under  an  extreme  range  of  con- 
ditions. 

Under  that  arrangement,  both  sides  were  bound  to  make  an 
effort  toward  conciliation.  If  that  failed,  then  they  agreed  to 
try  local  arbitration,  and  finally  national  arbitration.  It  is  true 
that  under  the  plan  of  arbitration  neither  side  has  obtained  what 
it  thought  it  was  entitled  to  receive,  but  friendly  relations  were 
maintained.  The  employers  had  the  opportunity  to  work  un- 
interrupted by  strike  or  lockout.  Neither  side  has  been  sub- 
jected to  the  wasting  effects  of  warfare.  Both  sides  have  been 
gainers.  The  principal  gain  of  the  employers  is  not  in  the 
troubles  they  have  settled,  but  in  those  they  have  prevented.  I 
know  of  no  other  group  of  employers  which  has  succeeded  in 
perfecting  a  great  pact  with  the  labor  unions  and  in  maintaining 
entirely  satisfactory  relations. 

HISTORY  OF  TRADE  AGREEMENTS. 

In  1901  the  newspaper  publishers  had  accepted  the  idea  of  the 
closed  shop  and  of  the  eight-hour  day.  They  had  decided  to 
deal  with  labor  representatives  rather  than  with  individuals,  and 
thereby  they  increased  the  responsibility  of  the  unions.  They 
recognized  the  fact  that  the  labor  question  was  full  of  complica- 
tions, and  that  the  leaders  of  the  unions  must  exercise  great 
patience  and  tact  in  controlling  the  men  who  elected  them  to 
office.  During  six  years,  ending  May  1,  1907,  arbitration  con- 
tracts had  prevailed  whereby  the  employers  and  employes  arbi- 
trated all  differences  arising  over  wages  and  hours  in  new  scales. 
A  new  agreement,  which  went  into  operation  on  May  1,  1907, 
included  "working  conditions"  within  the  scope  of  the  arbitra- 
tion, and  also  outlined  a  radical  departure  in  the  abandonment 
of  the  third  man,  or  umpire,  in  the  board  of  arbitration.  Each 
side  has  an  equal  number  of  votes. 

With  the  expiration  of  the  old  arrangement  and  the  inaugura- 
tion of  the  new  plan  the  newspapers  received  an  unusual  num- 
ber and  variety  of  demands.  Sufficient  time  has  not  elapsed  to 
test  thoroughly  the  merits  of  the  later  methods.  Only  partial 
returns  of  the  present  arbitration  programme  have  been  made 
to  the  association.    Thus  far,  this  year,  the  publishers  and  the 

348 


unions  have  discussed  seventy-six  new  scales  in  fifty-five  cities, 

with  the  following  results: 

Settled  by  conciliation  (which  means  by  concessions  to  the 

unions) 55 

By  arbitration 9 

Under  negotiation 12 

Total    76 

POLICY  TOWARDS  UNIONS  INCREASES  COST. 

Regardless  of  these  details,  we  find  that  the  adoption  of  arbi- 
tration for  the  adjustment  of  labor  disputes  has  tended  to  in- 
crease the  stability  of  investment  in  newspaper  property,  and  it 
has  afforded  a  means  for  the  settlement  of  minor  contentions 
which  formerly  caused  infinite  trouble,  often  leading  to  destruc- 
tion of  property,  enormous  losses  of  wages  and  the  engender- 
ing of  passion.  The  payments  they  made  for  the  maintenance 
of  this  arbitration  arrangement  and  for  the  carrying  out  of  the 
policies  of  conciliation  were  regarded  by  publishers  as  payments 
for  industrial  insurance,  just  as  they  paid  for  fire  and  accident 
insurance.  It  has  been  calculated  that  in  New  York  City  alone 
the  newspapers  pay  $1,500,000  per  annum  as  their  tribute  to  the 
closed  shop  and  to  organized  labor.  Any  attempt  to  estimate 
the  aggregate  paid  by  all  the  newspapers  of  the  country  would 
involve  too  many  complexities  to  justify  the  effort.  With  each 
new  concession  to  the  unions,  or  each  new  award  of  arbitrators, 
the  publishers  ask  how  far  this  payment  may  be  carried.  There 
are  limits  beyond  which  they  cannot  go,  even  though  they  are 
well  wishers  of  organized  labor.  They  are  approaching  that  limit 
where  their  necessities  may  force  them  to  stop  further  conces- 
sions and  allowances.  They  wish  to  emphasize  the  fact  that 
they  have  no  objections  to  unions.  They  believe  that  the 
unions,  notwithstanding  many  faults,  have  accomplished  excel- 
lent results  for  men  who  are  not  ambitious  to  rise  above  their 
employment.  They  believe  the  unions  can  do  much  that  is  use- 
ful in  the  future  in  the  way  of  securing  better  terms  for  workers 
who  deserve  them.  However,  they  have  a  right  to  complain  of 
those  unions  which  set  up  a  selfish  guild  for  individual  profit 
and  without  regard  for  the  rights  of  other  labor.  The  unions 
have  fallen  into  the  habit  of  expecting  more  from  a  newspaper 
than  any  union  could  hope  to  obtain  from  any  other  employer. 
These  unions  are  making  demands  upon  the  newspapers  be- 

349 


cause  of  supposed  friendliness  of  unions,  and  because  of  sup- 
posed helplessness  of  employers  in  resisting  such  exactions.  A 
newspaper,  to  exist,  must  run  all  the  time.  It  cannot  wait  to 
contest  strikes  or  to  resist  demands. 

EXACTIONS  OF  THE  PAPER  TRUST. 

Serious  as  this  labor  trust  may  appear  in  some  of  its  aspects, 
it  does  not  compare  in  objectionable  features  with  a  paper  com- 
bination, which  is  probably  the  most  remarkable  financial  freak 
that  we  can  find  in  a  long  list  of  combination  monstrosities. 
The  printing  and  publishing  business  as  a  whole  turns  over  its 
capital  in  about  ten  months.  Large  department  stores,  that 
advertise  energetically,  will  turn  over  their  stocks  about  seven 
times  a  year,  but  the  largest  paper  manufacturer  in  the  world — 
the  International  Paper  Company — with  a  capital  exceeding 
sixty  million  dollars  ($60,000,000),  does  a  gross  annual  business 
of  only  twenty-one  million  dollars  ($2 1, 000,000),  thus  requiring 
three  years  to  turn  over  its  capital.  It  has  watered  itself  until 
it  has  no  more  money  to  invest.  It  has  borrowed  upon  every- 
thing it  has.  It  cannot  earn  any  more  money  unless  it  can  do 
more  business,  and  it  cannot  do  more  business  because  it  has 
not  the  money  with  which  to  do  it.  Instead  of  accepting  its 
responsibilities  and  extending  its  business  to  keep  pace  with  the 
growth  of  its  customers,  the  International  Paper  Company  is 
producing  less  newsprint  paper  to-day  than  it  turned  out  im- 
mediately after  its  organization.  The  available  funds  at  its 
command,  which  should  have  been  used  for  new  paper  ma- 
chines, has  gone  toward  the  acquirement  of  2,597  square  miles 
of  timber  limits  registered  in  one  of  the  four  land  offices  in  the 
Province  of  Quebec,  Canada.  To  maintain  that  concern  and  its 
allied  combinations,  with  their  oppressive  weight  of  over-cap- 
italization, and  to  provide  a  pretext  for  protecting  the  labor  of 
15,000  paper  mill  employes,  receiving  less  than  nine  million  dol- 
lars ($9,000,000)  per  annum,  the  publishing  business  has  been 
subjected  to  a  series  of  deliberately  planned  schemes  of  extor- 
tion. The  first  step  was  accomplished  in  the  Dingley  bill,  so 
that  publishers  could  not  buy  paper  elsewhere.  The  next  step 
was  one  that  has  just  been  consummated,  whereby,  through 
combinations  made  in  defiance  of  the  Federal  courts,  the  sup- 
ply has  been  brought  below  the  demand,  the  market  has  been 
starved,  the  surplus  has  been  exhausted,  and  the  price  for  the 
present  year  has  been  advanced  $12  per  ton  upon  a  consump- 

350 


tion  of  900,000  tons,  an  addition  of  ten  millon  dollars  within  one 
year.  Increased  cost  of  manufacture  does  not  justify  such  an 
advance.  Aggravating  that  situation  is  a  threat  of  another  ad- 
vance of  $10  per  ton  next  year,  or  nine  million  dollars  more,  a 
total  of  nineteen  million  dollars'  advance  in  two  years  by  an 
industry  that  pays  an  aggregate  of  less  than  nine  million  dollars 
a  year  to  its  labor,  while  clamoring  to  Congress  for  a  continu- 
ance of  its  opportunities  to  combine  and  oppress  publishers. 

The  newspapers  insist  that  the  paper  manufacturers  who  in- 
duced Congress  to  protect  them  against  competition  from 
abroad  are  under  obligations  to  provide  for  the  present  and 
prospective  demands  of  consumers  in  this  country.  To  repress 
manufacture,  or  to  starve  the  market  so  that  the  paper  maker 
is  in  position  to  create  a  famine  and  to  stop  the  supply  to  any 
publisher,  should  rank  as  a  crime.  Many  newspaper  proprietors 
are  unable  to  obtain  any  quotations  for  paper  next  year,  and 
do  not  know  where  to  obtain  a  supply.  In  all  the  history  of 
crimes  charged  against  combinations  and  trusts,  such  a  sit- 
uation is  unprecedented.     It  demands  immediate  remedy. 

MR.  REYNOLDS :    Hon.  Henry  W.  Palmer  has  presented 
a  paper  entitled,  "Federal  Incorporation,"  which  he  desires  to 
have  read  by  title  only  and  to  appear  in  the  proceedings  of  the 
conference.    If  there  is  no  objection,  it  will  be  so  ordered. 
Hon.  Henry  W.   Palmer. 

Complaint  is  made  that  certain  combinations  of  capital  in  the 
form  of  corporations  chartered  by  different  states  and  exten- 
sively engaged  in  transacting  the  manufacturing  business  of  the 
country  are  exceeding  their  privileges  by  seeking  a  monopoly 
of  the  markets,  and  that  the  means  used  to  effect  this  result  are 
restraint  of  trade  by  various  means  and  destruction  of  competi- 
tion by  destroying  competitors. 

It  may  be  admitted  that  there  is  ground  for  complaint.  The 
heavy  hand  of  the  so-called  trusts  has  been  laid  upon  individuals 
in  all  parts  of  the  country,  and  the  wail  of  the  injured  has  arisen 
from  every  point  of  the  compass. 

Remedies  may  be  proposed  more  or  less  effectual.  They  are 
generally  repressive  measures  calculated  to  restrain  the  alleged 
evils  growing  out  of  this  great  and  unusual  industrial 
development. 

Any  one  capable  of  comprehending  the  legal  and  economic 
relations  of  the  subject  cannot  fail  to  be  impressed  with  the 

3Si 


manifold  difficulties  that  beset  the  path  of  the  law  makers 
at  every  step. 

The  dual  nature  of  the  government ;  the  fact  that  the  corpora- 
tions called  trusts  are  creations  of  the  sovereign  States  and  are 
mainly  engaged  in  lawful  business ;  that  the  power  of  Congress 
is  inexorably  limited  by  the  grants  of  the  Constitution,  which 
as  construed  and  defined  by  the  Supreme  Court  forbids  inter- 
ference with  manufacturing  within  a  State ;  that  a  large  part  of 
the  business  of  the  country  is  now  carried  on  by  the  so-called 
trusts  and  that  their  destruction  or  serious  disturbance  would 
involve  loss  of  employment  to  millions  of  workmen,  destruction 
to  billions  of  value  held  by  honest  investors,  and  general  con- 
ditions of  general  bankruptcy  and  ruin  to  the  most  prosperous 
people  and  nation  of  the  earth,  are  all  properly  and  necessarily 
to  be  considered  by  wise  and  prudent  men  who  wish  to  do  good 
and  not  evil. 

One  of  the  methods  that  is  suggested  by  which  the  corpora- 
tions may  be  brought  under  Federal  control  is  to  grant  them 
Federal  charters. 

CAN  CONGRESS  CHARTER  CORPORATIONS? 

The  first  inquiry  is,  has  Congress  the  right,  under  the  powers 
conferred  by  the  Constitution  to  regulate  commerce,  to  char- 
ter business  corporations  for  the  purpose  of  manufacturing 
and  selling  goods  which  enter  interstate  and  foreign  commerce? 

Second.  If  the  power  exists  to  incorporate  such  companies, 
would  its  exercise  be  expedient  and  beneficial  to  the  people? 

Reference  to  what  has  been  done  by  Congress  may  assist  in 
determining  what  may  be  done. 

Under  the  authority  to  regulate  commerce,  the  Act  of  1890, 
commonly  called  the  Sherman  act,  was  passed.  This  act  is  en- 
titled, "An  Act  to  protect  trade  and  commerce  against  unlaw- 
ful restraints  and  monopolies. " 

By  its  terms  every  contract  in  restraint  of  trade  or  commerce 
among  the  States  is  declared  illegal,  and  every  person  making 
such  a  contract  is  guilty  of  a  misdemeanor,  punishable  by  fine  or 
imprisonment. 

The  United  States  Courts  are  invested  with  jurisdiction  to 
enforce  the  act,  and  the  district  attorneys  directed  to  institute 
proceedings  under  the  direction  of  the  Attorney-General  to  en- 
force the  act.    The  broadest  powers  are  given  to  the  Courts  to 

352 


bring  non-residents  within  the  jurisdiction  from  any  part  of 
the  United  States  or  the  Territories,  when  necessary.  Prop- 
erty owned  under  any  such  illegal  contract  while  in  transporta- 
tion from  one  State  to  another  shall  be  seized,  condemned  and 
forfeited  to  the  United  States.  Any  person  injured  by  any  such 
contract,  trust  or  corporation  shall  have  the  right  to  sue  in 
any  United  States  Court  when  the  defendant  can  be  found 
within  its  jurisdiction,  without  respect  to  the  amount  in  contro- 
versy, and  may  receive  three  times  the  actual  damage.  The 
word  "person"  in  the  act  includes  all  corporations  and  associa- 
tions existing  with  or  without  the  authority  of  the  laws  of  the 
States. 

SHERMAN  ACT  A  STEP  TOWARDS  FEDERAL  INCORPORATION. 

This  act  pays  no  respect  to  State  lines  or  State  laws.  Cor- 
porate rights  obtained  under  charters  from  sovereign  States 
are  not  considered.  The  vast  bulk  of  goods  and  property 
which  enter  into  interstate  commerce  are  swept  within  the 
grasp  and  control  of  Federal  law  and  made  subject  to  the  juris- 
diction of  the  Federal  Court.  Such  property  may  be  seized,  con- 
demned and  confiscated  by  the  United  States  without  respect 
to  who  owns  or  where  made  or  to  whom  consigned.  The  rights 
of  citizens  of  States,  enjoyed  since  the  foundation  of  the  States, 
to  be  tried  in  the  courts  of  their  domicile  is  taken  away  and  a 
citizen  of  South  Carolina  may  be  summoned  before  a  United 
States  Court  in  Maine,  and  there,  by  due  process  of  law,  be  de- 
prived of  his  liberty  and  property.  No  edict  of  emperor  or 
ukase  oi  czar  can  be  found  more  drastic  or  sweeping  in  severity 
of  penalty  or  facility  for  enforcement.  The  full  power  of  the 
legal  machinery  of  the  Government  is  placed  at  the  disposal  of 
the  injured  person.  He  may  summon  the  chief  law  officer  of 
the  United  States  and  his  subordinates  to  prosecute  his  griev- 
ance and  exact  from  the  defendant  a  three-fold  damage. 

This  law  has  been  adjudged  to  be  within  the  power  of  Con- 
gress under  the  right  to  regulate  commerce  between  the  States. 
In  no  less  than  six  cases  the  Supreme  Court  of  the  United 
States  has  maintained  and  enforced  the  law,  viz.,  in  the  case  of 
United  States  vs.  Knight  Company,  156  U.  S.  1 ;  United  States 
vs.  Trans  Missouri  Freight  Association,  166  U.  S.  290;  United 
States  vs.  Joint  Traffic  Association,  171  U.  S.  505;  United 
States  vs.  Hopkins,  171  U.  S.  578;  Anderson  vs.  United  States, 

353 


]7i  U.  S.  604,  and  Addyston  Pipe  and  Steel  Company  vs.  United 
States,  175  U.  S.  211. 

Attorney  General  Knox  summarized  these  cases  as  follows : 

"In  the  Knight  case  there  was  involved  an  illegal  monopoly 
in  the  production  of  sugar,  commonly  known  as  the  'Sugar 
Trust/  In  the  Freight  Association  and  Joint  Traffic  Associa- 
tion cases,  agreements  among  interstate  railroads  fix  and  main- 
tain rates  and  fares ;  in  the  Hopkins  and  Anderson  cases  two 
live-stock  exchanges,  located  in  Kansas  City,  and  the  Addyston 
Pipe  and  Steel  Company  case  a  combination  among  competing 
shops  located  in  different  States,  and  engaged  in  making  cast- 
iron  pipe  for  gas,  water  and  sewer  purposes,  to  control  prices 
by  suppressing  competition  among  themselves. 

"In  the  Knight  case  the  Court  held  that  the  creation  of  a 
monopoly  in  production  does  not  necessarily  and  directly  re- 
strain commerce  among  the  States.  The  Court  drew  the  line 
between  production  and  interstate  commerce,  the  former  being- 
subject  to  the  regulation  of  the  State,  the  latter  alone  to  that  of 
Congress. 

"In  the  Freight  Association  case  the  Court  held  that  the 
anti-trust  law  applies  to  railroads,  and  that  it  prohibits  all 
agreements  in  restraint  of  interstate  commerce,  whether  the  re- 
straint be  reasonable  or  unreasonable. 

"This  was  followed  by  the  Joint  Traffic  decision,  the  Court 
holding  in  addition  that  the  anti-trust  law  is  valid  and  consti- 
tutional, and  that  Congress  has  the  power  to  say  that  a  con- 
tract shall  not  be  lawful  which  restrains  trade  or  commerce 
among  several  States  by  stifling  competition. 

"In  the  Hopkins  case  it  was  held  that  the  business  of  the 
members  of  the  Kansas  City  Live  Stock  Exchange  was  not  in- 
terstate commerce  within  the  meaning  of  the  anti-trust  law, 
and  therefore  the  agreement  creating  the  Exchange  did  not 
operate  to  restrain  trade  or  commerce  within  the  several  States. 

"In  the  Anderson  case  the  Court  took  the  view  that  whether 
the  members  of  the  Traders'  Live  Stock  Exchange  of  Kansas 
City  were  or  were  not  engaged  in  interstate  commerce,  the 
agreement  creating  the  exchange  was  not  one  in  restraint  of 
such  trade. 

"In  the  Addyston  Pipe  Company  case  the  Court  held  that 
Congress  may  prohibit  the  performance  of  any  contract  between 
individuals  or  corporations  where  the  natural  and  direct  effect 

354 


is  to  regulate  or  restrain  interstate  commerce,  and  that  a  com- 
bination among  formerly  competing  shops,  which  directly  re- 
strained not  simply  the  manufacture  but  the  sale  of  a  commodity 
among  the  several  States,  comes  within  the  anti-trust  law." 

The  question  whether  Congress  has  plenary  power  over  goods 
and  property  that  enter  into  interstate  commerce  is  therefore 
settled,  and  it  is  settled  also  that  whoever  engages  in  such  com- 
merce must  do  it  subject  to  the  rules  and  regulations  provided 
by  Federal  laws. 

The  Congress  of  the  United  States  has  also  exercised  the 
power  to  grant  Federal  charters  to  carry  on  the  business  of 
banking  in  the  States  under  which  the  sovereign  power  of  the 
State  to  impose  taxes  has  been  limited ;  to  construct  railroads 
across  the  territories  of  States  without  their  consent;  to  con- 
demn land  within  the  States  in  order  to  carry  out  the  purposes 
of  the  powers  vested  in  the  Government  by  the  Constitution, 
and  to  incorporate  trades  unions,  with  authority  to  exist  in  any 
and  all  States,  and  to  hold  such  land  as  may  be  necessary  for 
their  business. 

STEPS  ALREADY  TAKEN  IN  REGULATION  OF  COMMERCE. 

In  the  execution  of  the  power  to  regulate  commerce,  Con- 
gress has  established  ports  of  entry  and  delivery,  divided  the 
coast  into  collection  districts,  granted  coasting  licenses,  excluded 
foreign  built  vessels  from  the  coasting  trade,  expended  money 
in  surveying,  sounding  and  chartering  navigable  rivers,  clean- 
ing out  and  improving  channels,  established  custom  houses, 
warehouses,  scales,  etc. ;  erected  lighthouses,  stationed  light 
ships,  denied  the  power  of  the  States  to  tax  freight  transported 
from  State  to  State  or  to  discriminate  against  owners  of  goods 
brought  into  a  State  for  sale,  or  to  exact  a  license  from  persons 
dealing  in  foreign  goods.  Congress  has  taken  private  property 
in  the  exercise  of  the  power  to  regulate  commerce  (148  U.  S. 
312),  constructed  railroads  across  States  and  Territories,  ex- 
ercised right  of  eminent  domain  and  regulated  fares  and  freights. 
(California  vs.  Central  Pacific,  127  U.  S.) 

JUDICIAL  INTERPRETATION  OF  THE  COMMERCE  CLAUSE. 

The  power  to  regulate  commerce,  like  all  others  vested  in 
Congress,  is  complete  in  itself,  and  has  no  limitation  other  than 
that  prescribed  by  the  Constitution  (Gibbons  vs.  Ogd'en,  9 
Wheat.  1). 

355. 


The  power  to  regulate  interstate  and  foreign  commerce, 
vested  in  Congress,  is  the  power  to  prescribe  rules  by  which  it 
shall  be  governed;  that  is,  the  condition  upon  which  it  shall 
be  conducted;  to  determine  when  it  shall  be  free  and  when  sub- 
ject to  duty  and  other  exactions.     (114  U.  S.  196.) 

The  power  of  Congress  extends  to  acts  done  on  land  which 
interfere  with,  obstruct,  or  prevent  the  due  execution  of  the 
power  to  regulate  commerce  and  navigation  with  foreign  nations 
and  among  the  States,  and  such  acts  may  be  punished  by  Con- 
gress (U.  S.  2-12  Pet.  72) 

These  things  Congress  has  done.  Has  the  limit  of  power 
been  reached? 

It  may  be  of  interest  to  inquire  what  commerce  really  is,  as 
defined  by  the  Supreme  Court.  Chief  Justice  Fuller  in  United 
States  vs.  Knight  (156  U.  S.   11),  said: 

"The  Constitution  does  not  provide  that  interstate  commerce 
shall  be  free,  but,  by  the  grant  of  this  exclusive  power  to  regu- 
late it,  it  was  left  free,  except  as  Congress  might  impose  re- 
straints. 

"No  limitation  has  ever  been  fixed  by  the  Supreme  Court  to 
the  phrase,  'commerce  among  the  States.'  Its  narrowest  defini- 
tion at  least  embraces  the  'conduct  of  individuals,'  in  'buying  and 
selling  or  barter/ 

"In  argument  in  Gibbon  vs.  Ogden  (9  Wheat.)  it  was  claimed 
that  navigation  was  not  included  within  the  meaning  of  the 
term;  and  the  Court  remarked,  at  page  190: 

'  'The  mind  can  scarcely  conceive  of  a  system  for  regulating 
commerce  between  the  States )  which  shall  ...  be  confined 
to  prescribing  rules  for  the  conduct  of  individuals  in  the  actual 
employment  of  buying  and  selling  or  barter/ 

"Other  deliverances  on  the  subject  are  as  follows: 

"  'Commerce  is  absolutely  traffic.  But  it  is  also  something 
more.     It  is  intercourse/  (Gibbon  vs.  Ogden,  9  Wheat.  181.) 

"  'Sale  is  the  object  of  importation,  and  it  is  an  essential  ele- 
ment of  commerce/     (Brown  vs.   Maryland,   12  Wheat.  419.) 

"  'Commerce  is  intercourse ;  one  of  its  most  ordinary  ingre- 
dients is  traffic/     (Brown  vs.  Maryland,  12  Wheat.  446.) 

"  'Commerce  is  a  term  of  the  largest  import.  It  comprehends 
intercourse  for  the  purpose  of  trade  in  any  and  all  of  its  forms, 
including  the  transportation,  purchase,  sale,  and  exchange  of 
commodities  between  the  citizens  of  our  country  and  the  citi- 

356 


zens  of  other  countries,  and  between  the  citizens  of  different 
States.'     (Welton  vs.   State  of  Missouri,   i   Otto  275.) 

"  'Commerce  with  foreign  countries  and  among  the  States, 
strictly  considered,  consists  in  intercourse  and  traffic,  including 
in  these  terms,  navigation  and  the  transportation  and  transit  of 
persons  and  property,  as  well  as  the  purchase,  sale  and  exchange 
of  commodities/  (County  of  Mobile  vs.  Kimball,  102  U.  S.  702). 

"  'The  negotiations  of  sales  of  goods  which  are  in  another 
State,  for  the  purpose  of  introducing  them  into  the  State  in 
which  the  negotiation  is  made,  is  interstate  commerce/'  (Rob- 
bins  vs.  Shelby  Taxing  District,  120  U.  S.  497,  1886.) 

"  'While  the  completely  internal  commerce  of  a  State  is  re- 
served to  the  State  itself,  because  never  surrendered  to  the  gen- 
eral government,  commerce,  the  regulation  of  which  is  committed 
by  the  Constitution  to  Congress,  comprehends  traffic,  navigation, 
and  every  species  of  commercial  intercourse  or  trade  between  the 
United  States,  among  the  several  States  and  the  Indian  Tribes/ 
(Interstate  Commerce  Commission  vs.  Brimson,  154  U.  S.  447, 
1894.) 

"  'Definitions  as  to  what  constitutes  interstate  commerce  are 
not  easily  given,  so  that  they  shall  clearly  define  the  full  mean- 
ing of  the  term.  We  know  from  the  cases  decided  in  this  Court 
that  it  is  a  term  of  very  large  significance.  It  comprehends,  as 
it  is  said,  intercourse  for  the  purposes  of  trade  in  any  and  all  of 
its  forms,  including  transportation,  sale,  purchase,  and  the  ex- 
change of  commodities  between  the  citizens  of  different  States/ 
(Tustice  Peckham  in  Hopkins  vs.  United  States,  October  24, 
1898,  171  U.  S.  597-) 

"(See  United  States  vs.  Addyston  Pipe  &  Steel  Co.,  54  U.  S., 
App.  723  et  seq.  Supreme  Court  decision  December  4,  1899, 
175  U.S.  211.") 

Commerce,  according  to  these  definitions,  in  its  narrowest 
definition  embraces  the  "conduct  of  individuals  in  buying,  sell- 
ing, and  barter."  The  power  to  regulate  is  not  extended  to  pre- 
scribing the  rules  and  regulations  for  the  conduct  of  individuals 
in  the  actual  employment  of  buying  and  selling  or  of  barter ;  it 
is  something  more  than  traffic ;  it  is  intercourse  for  the  purpose 
of  trade  in  any  and  all  its  forms  between  citizens  of  different 
States  and  foreign  countries.  Over  the  subject  of  commerce 
and  over  the  persons  engaged  in  commerce  the  most  plenary 
jurisdiction  has  been  lawfully  exercised  by  Congress. 

357 


THE  CORPORATION  AN  INSTRUMENTALITY  OF  COMMERCE. 

Among  the  instrumentalities  by  which  commerce  is  carried 
on,  and  without  which  it  cannot  be  successfully  conducted,  are 
corporations.  May  Congress  create  a  necessary  instrumentality 
by  which  and  through  which  commerce  may  be  conducted,  viz., 
a  corporation?  The  corporations  now  existing,  except  the 
Pacific  railroads,  engaged  in  the  business  of  interstate  com- 
merce are  creatures  of  the  States.  The  right  to  exist  depends 
on  the  State  laws.  Beyond  the  borders  of  the  State  of  its  pater- 
nity a  corporation  exists  and  does  business  only  by  permission 
of  the  sovereignty  which  it  enters.  By  comity  alone,  not  by 
right,  the  corporations  of  the  several  States  transact  business 
outside  of  their  State  of  creation. 

Any  State  may  exclude  the  corporations  of  another  State  or 
admit  them  only  on  terms  that  would  be  prohibitory.  The  exclu- 
sion of  the  Standard  Oil  Company  from  the  State  of  Texas  is 
a  case  in  point.  The  right  to  amend  or  repeal  charters  is  re- 
served by  many,  if  not  by  all  the  States  of  the  Union.  Of  course 
the  repeal  of  charters  of  all  corporations  engaged  in  interstate 
commerce  is  an  unthinkable  proposition,  but  the  right  to  do  it 
exists.  Suppose  the  States  of  the  Union  saw  fit  to  exercise  this 
right.  Commerce  would  languish  and  die.  To  meet  this  in- 
tolerable condition,  should  it  arise,  has  Congress  the  power  to 
grant  charters  to  business  corporations  to  engage  in  interstate 
commerce  authorizing  them  to  transact  business  in  all  the  States 
and  Territories  of  the  United  States?  Having  power  to  regu- 
late, may  Congress  not  provide  an  instrumentality  necessary  to 
the  existence  of  the  thing  to  be  regulated?  It  is  no  answer  to 
say,  'There  is  no  danger,  the  States  will  never  perpetrate  such 
an  act  of  ineffable  folly."  The  question  is  not  whether  the  neces- 
sity will  ever  arise,  but  whether,  if  it  should  arise,  the  power 
exists  in  Congress  to  rescue  from  destruction,  the  commerce 
between  the  States,  which  it  has  the  undeniable  power  to  regu- 
late. 

We  may,  therefore,  conclude  that  Congress,  having  the  power 
to  regulate  commerce,  has  all  necessary  power  to  effectuate  the 
purpose  for  which  the  right  was  conferred.  The  right  to  regu- 
late commerce  was  surrendered  by  the  States  to  the  Federal 
Government  for  the  purpose  of  preserving  it  free  and  unham- 
pered by  State  restrictions.  Perhaps  no  subject  received  more 
anxious  consideration  in  the  Convention  that  framed  the  Con- 
stitution.    One  of  the  chief  reasons   for  calling  the  Convention 

358 


was  to  vest  the  power  somewhere,  free  commerce  from  the  in- 
tolerable restriction  of  the  States,  and  secure  the  right  to  make 
commercial  treaties  with  other  countries.  (See  Hist.  Const., 
Vol.  3). 

The  want  of  power  to  regulate  commerce  and  make  treaties 
with  foreign  countries  was  a  chief  source  of  trouble  in  the  Con- 
federation. It  was  the  chief  cause  of  calling  the  Convention 
that  framed  the  Constitution.  It  was  one  of  the  profound  sub- 
jects for  debate,  and  one  of  the  great  factors  in  the  action  of 
the  States  in  adopting  the  Constitution.  In  consideration  of 
the  concession  of  the  power  to  Congress  to  regulate  commerce, 
the  Southern  States  inserted  the  condition  that  exports  should 
not  be  taxed,  that  the  slave  trade  should  not  be  prohibited  until 
1808,  and  that  two-thirds  of  all  the  slaves  should  be  counted  as 
the  basis  of  representation. 

No  State  has  the  right  to  exclude  from  is  borders  the  trade 
of  interstate  commerce,  although  it  may  exclude  a  foreign  cor- 
poration from  entering.  The  original  package  may  go  every- 
where, despite  State  laws.  The  agent  negotiating  the  sale  of 
goods,  the  subject  of  interstate  commerce  cannot  be  excluded 
from  a  State  by  the  imposition  of  license  fees  imposed  under  the 
taxing  power. 

Both  agents  and  goods  must  be  admitted.  So  much  has  al- 
ready been  decided.  Then  why  may  not  Congress  authorize  an 
agency  in  the  form  of  a  business  corporation  organized  under 
Federal  law  to  do  business  in  any  State  or  Territory,  if  deemed 
necessary  or  useful  to  effectuate  the  purpose  in  view  when  the 
power  to  regulate  commerce  was  conferred?  Of  the  necessity, 
Congress  must  be  the  sole  judge.  If  the  power  exists  the  time 
and  circumstances  of  its  exercise  must  rest  in  Congress.  Legis- 
lative discretion  is  not  removable  by  any  court. 

IS  FEDERAL  INCORPORATION  EXPEDIENT? 

If  the  power  exists  would  it  be  expedient  and  beneficial  to  the 
people  to  incorporate  such  companies? 

Let  the  probable  objections  be  considered. 

First.  Interference  with  the  business  of  granting  charters  by 
the  States. 

Second.  Federal  control  over  such  corporations  would  in- 
volve incidental  control,  and  to  some  extent  of  the  business  of 
interstate  corporations. 

359 


As  to  the  first  objection,  the  right  of  the  State  to  grant  charters 
of  incorporation  would  not  be  affected.  The  financial  injury 
that  might  result  would  be  determined  by  the  number  of  corpo- 
rations that  might  seek  Federal  instead  of  State  charters.  The 
right  to  equally  tax  tangible  property  of  such  corporations  doing 
business  in  a  State  would  remain.  Nothing  would  be  lost  but 
the  right  to  tax  the  franchise.  The  extent  of  the  financial  in- 
jury that  such  an  act  would  inflict  is  purely  conjectural  and  not 
worth  considering.  What  the  States  lost  in  that  respect  the 
United  States  would  gain,  and  the  people  of  each  State  would 
be   proportionately   benefited. 

As  to  the  second  objection,  no  doubt  there  is  a  wide  differ- 
ence of  opinion  on  the  question  of  the  expediency  of  any  inter- 
ference by  the  Government  with  the  business  of  the  country 
in  any  way,  and  no  thoughtful  person  will  contend  that  there 
is  not  good  reason  for  such  difference.  Theoretically  the  func- 
tions of  the  Government  are  fully  performed  when  the  people 
are  protected  in  their  rights  of  life,  liberty,  reputation  and  the 
pursuit  of  happiness.  Practically,  as  the  conditions  change  and 
a  nation  emerges  from  a  pastoral  and  bucolic  state  and  engages 
extensively  in  manufacturing,  transporting  and  selling  goods 
in  the  markets  of  the  world,  when  nearly  all  the  active  business 
passes  out  of  the  hands  of  individuals  and  into  the  control  of 
corporations,  upon  the  success  of  wrhich  a  large  proportion  of 
the  people  are  dependent  for  an  opportunity  to  earn  a  living,  and 
upon  which  in  a  large  measure  the  general  prosperity  and  hap- 
piness depend,  when  the  power  and  influence  of  such  corporate 
bodies  become  great  enough  to  exercise  influence  over  the  peo- 
ple's Government  in  the  great  executive,  legislative  and  judi- 
cial departments,  we  may  at  least  be  brought  to  consider 
whether  the  right  of  the  individual  to  life,  liberty  and  the  pur- 
suit of  happiness  will  not  be  best  conserved  by  laying  a  regulat- 
ing hand  on  the  instrumentalities  of  trade,  commerce  and  man- 
ufacture, and  by  controlling  any  disposition  on  their  part  to 
usurp  the  functions  of  government,  to  monopolize  the  produc- 
tion and  sale  of  the  necessaries  of  life,  or  to  unfairly  use  their 
power  to  hamper  and  destroy  the  competition  of  individuals. 

SUPERVISION  NECESSARY  AND  STATE  LAWS  INADEQUATE. 

Assuming  that  no  sane  persons  desire  the  destruction  of  the 
business  corporations  of  the  United  States,  large  or  small,  the 

360 


question  is  whether,  under  present  conditions,  in  view  of  the 
fact  that  they  are  necessary  to  the  prosperity  of  the  people, 
they  should  not  be  brought  under  some  authority  that  can  keep 
them  in  subjection  and  within  the  sphere  of  their  rights.  The 
power  of  the  States  is  confessedly  and  notoriously  inadequate. 
The  Federal  Government  alone  is  able  to  successfully  under- 
take the  task. 

After  all,  this  is  a  government  of  the  people ;  the  Congress  is 
their  Congress.  That  there  is  an  almost  universal  demand  for 
some  kind  of  restraint  upon  the  vast  aggregations  of  capital 
that  have  lately  sprung  into  existence  is  evidence  that  such  re- 
straint is  needed.  Some  of  the  clamor  is  no  doubt  born  of 
hatred  of  success  and  envy  of  prosperity;  some  comes  from 
those  who  believe  property  a  crime  and  its  owners  criminals; 
some  comes  from  people  who  have  very  positive  opinions,  but 
who  never  think;  but  far  more  is  based  upon  a  reasonable  ap- 
prehension that  combinations  in  restraint  of  trade  have  been 
formed;  that  corporations  that  intend  to  monopolize  the  pro- 
duction and  sale  of  at  least  some  of  the  necessaries  of  life  do 
exist,  and  that  well  organized  and  successful  efforts  have  been 
made  by  them  to  ruin  competitors  and  destroy  competition. 

If  all  of  these  apprehensions  are  not  well  founded;  if  all 
the  trusts  are  honestly  pursuing  lawful  business  in  a  lawful  way, 
no  act  of  Congress  that  is  likely  to  be  passed  will  disturb  them 
or  make  them  afraid. 

ADVANTAGES  OF  FEDERAL  CHARTERS. 

If  corporations  engaged  in  interstate  commerce  do  not  de- 
sire incorporation  under  Federal  charters  they  cannot  be  com- 
pelled to  take  them  out.  If,  on  the  other  hand,  such  corpora- 
tions, in  order  to  escape  the  limitations,  exactions  and  annoy- 
ances imposed  upon  them  by  the  States,  are  willing  to  submit 
themselves  to  the  control  of  Congress,  the  opportunity  would 
be  given  if  a  general  Federal  incorporation  act  could  be  en- 
acted. If  corporations  engaged  in  interstate  commerce  accept- 
ed Federal  charters,  the  question  of  adequate  and  proper  reg- 
ulation and  control  would  be  vastly  simplified. 

The  experience  of  the  greatest  manufacturing  and  commercial 
country  in  the  world  ought  to  be  of  value  in  seeking  a  solution 
of  the  question  as  to  the  methods  by  which  corporations  may 

361 


be  safely  created  and  the  extent  of  the  power  that  may  be  prop- 
erly intrusted  to  them. 

The  English  Companies  Act,  passed  originally  in  1882,  and 
amended  in  1886  and  1890,  furnishes  the  methods  by  which 
practically  all  corporations,  except  banks,  may  be  incorporated. 
Under  this  law  persons  desiring  to  form  a  corporation  may  file 
a  statement  in  the  office  of  the  registrar,  setting  forth  minutely 
and  in  detail  the  kind,  value  and  location  of  their  property,  the 
amount  of  capital  stock,  the  number  of  shares  into  which  it  is 
divided,  the  names  of  the  directors  and  shareholders  and  the 
nature  of  the  business  intended  to  be  carried  on,  and  the  kind 
of  liability  assumed  by  the  directors  and  shareholders. 

Several  kinds  of  business  may  be  conducted  by  the  same 
company;  there  is  no  limit  to  the  number  of  kinds.  The  amount 
of  capital  or  number  of  shares  is  unrestricted.  Once  formed 
the  corporation  may  do  business  anywhere  in  the  British  Em- 
pire. New  Jersey  is  not  more  liberal  than  Great  Britain  in 
granting  charters  of  incorporation.  The  vast  experience  of 
this  great  manufacturing  nation  has  eventually  wrought  the 
conclusion  that  the  instrumentalities  of  business  should  be  freely 
granted  and  as  little  hampered  by  vexatious  conditions  as  pos- 
sible. Always  retaining  the  right  to  knowledge  of  the  property 
and  purposes  of  corporations,  and  reserving  such  supervision 
as  will  enable  creditors  to  wind  up  and  fairly  distribute  the  as- 
sets of  bankrupt  concerns,  the  English  law  allows  the  largest 
liberty  to  carry  on  any  kind  of  business  at  any  place  in  the 
Kingdom  or  Empire. 

FEDERAL  CORPORATIONS  IMPLY  NO   HOSTILITY  TO   REASON- 
ABLE  BUSINESS  ENTERPRISE. 

A  Federal  charter  should  allow  a  corporation  to  transact 
business  in  any  State  or  Territory  of  the  United  States,  subject 
only  to  such  regulations  as  Congress  might  prescribe  and  to 
such  taxation  as  the  States  impose  on  similar  business  agencies 
chartered  by  themselves  and  no  more.  It  may  be  assumed  that 
Federal  control  over  business  corporations  engaged  in  interstate 
commerce  would  be  reasonable.  The  debate  on  the  pending 
anti-trust  regulations  has  not  developed  a  disposition  on  the 
part  of  the  most  ferocious  enemies  of  trusts  to  do  anything 
hurtful  to  honest  and  legitimate  business  enterprises.  It  is  the 
dishonest   and    illegitimate   enterprises,   brought   into   being   for 

362 


the  purpose  of  swindling  the  public  by  imposing  upon  it  worth- 
less stock  and  bonds,  as  well  as  those  other  combinations  con- 
ceived for  the  purpose  of  monopolizing-  some  line  of  business, 
stifling  competition  and  restricting  trade,  against  which  indig- 
nation has  been  properly  hurled.  Perhaps  the  selection  of  con- 
cerns to  be  vituperated  has  not  always  been  judicious,  but  ab- 
stractly, no  one  can  or  cares  to  defend  the  class  of  corporations 
named.  The  people  are  entitled  to  an  honest  and  legitimate  use 
of  the  special  privileges  conferred  upon  capital  by  the  grant  of 
corporate  functions.  They  ought  not  to  be  turned  into  engines  of 
oppression  to  competitors  or  of  robbery  of  consumers. 

Honest  business  honestly  pursued  need  fear  nothing  from 
this  or  any  succeeding  Congress. 

SECRETARY  REYNOLDS :  I  am  requested  to  read  by  title 
a  paper  on  "The  American  Society  of  Equity  and  Its  Need  in 
Our  Country/'  prepared  by  Mr.  J.  A.  Everitt,  President  of  the 
American  Society  of  Equity. 

Mr.  J.  A.  Everitt. 

Mr.  Chairman — The  object  of  the  National  Civic  Federation 
is  to  organize  the  best  brains  of  the  nation  in  an  educational 
movement  toward  the  solution  of  some  of  the  great  problems 
related  to  social  and  industrial  progress ;  to  provide  for  study  and 
discussion  of  questions  of  national  import;  to  aid  thus  in  the 
crystallization  of  the  most  enlightened  public  opinion,  and,  when 
desirable,  to  promote  legislation  in  accordance  therewith. 

The  object  of  the  American  Society  of  Equity  is  as  broad  as 
the  above  declaration  and  goes  much  further.  For  instance,  it 
proposes  not  only  to  organize  the  best  brains  of  the  country,  but 
the  multitude  of  our  citizens.  It  is  an  educational  movement,  but 
it  does  not  stop  there.  It  is  building  a  machine  for  action.  It 
does  not  aim  to  solve  some  of  the  great  social  and  industrial  prob- 
lems, but  all  of  them.  It  also  boldly  declares  that  it  will  compel 
legislation,  in  accordance  with  the  most  enlightened  public  opin- 
ion, when  it  is  established.  In  other  words,  its  purpose  is  to 
secure  equity  and  fair  dealings  in  all  the  business  relations  of 
human  life. 

You  ask,  What  is  this  American  Society  of  Equity  that  pro- 
poses to  organize  the  multitude  of  our  people;  that  is  building  a 
machine  behind  which  will  be  this  multitude  of  the  people;  that 
proposes  to  solve  all  our  great  social  and  industrial  problems,  and 

363 


not  beg  for  legislation  for  the  people,  but  demand  and  compel  it? 
These  are  questions  that  the  uninformed  naturally  ask. 

THE  AMERICAN  SOCIETY  OF  EQUITY. 

The  American  Society  of  Equity  is  primarily  a  farmers'  organ- 
ization. But  it  says  in  its  constitution,  where  defining  its  mem- 
bership, "and  it  shall  consist  of  farmers  and  other  persons  who 
favor  and  are  willing  to  assist  in  the  accomplishment  of  the  pur- 
poses of  the  society." 

Farmers  compose  the  greatest  class  of  our  people,  numerically, 
and  the  most  important  class,  industrially,  and  we  might  say  that 
when  the  farmers  are  organized  the  people  will  be  organized. 
This  will  be  true  as  regards  the  majority,  and  the  majority  rules. 
Also  it  will  be  true  industrially,  because  the  farmers'  products 
are  the  greatest  economic  factor  of  the  nation. 

The  American  Society  of  Equity  is  largely  an  educational  and 
organizing  society.  But  it  is  not  exclusively  so.  It  is  incorpo- 
rated without  capital  stock,  yet  it  will  direct  the  marketing  of  all 
the  farm  crops.  To  direct  them  it  must  come  into  control  of 
them.  This  it  will  do  through  pledging,  and  it  has  been  in  con- 
trol of  some  crops  in  the  past,  and  directed  the  marketing  to 
secure  profitable  prices  of  the  producers'  own  making  instead  of 
often  unprofitable  prices  of  speculators'  making.  Thus,  without 
a  dollar  of  capital  stock,  the  American  Society  of  Equity  will  be 
the  greatest  industrial  factor,  or  organization,  the  country  ever 
knew.  For  you  to  understand  how  this  will  be  possible  without 
capital  stock,  I  will  say  that  the  expense  of  organizing  and  main- 
taining the  society  is  met  through  a  small  individual  membership 
fee  and  small  annual  dues,  but  which,  in  the  aggregate,  make  im- 
mense sums,  while  the  expense  of  marketing  is  met  by  a  small 
sum  added  to  each  pound,  dozen,  crate,  bushel,  bale  or  ton  of 
produce  pledged  to  the  society,  and  which  the  society  directs  the 
marketing  of,  and  the  purchaser  pays  it.  Thus,  $2  each  as  mem- 
bership fee  amounts  to  $2,000,000  for  a  million  members,  and  $2 
a  year  dues  amounts  to  $2,000,000  for  each  million  members. 
Also,  one  cent  per  bushel  on  the  principal  grain  crops,  corn,  wheat 
and  oats,  placed  in  the  treasury  of  the  society,  or  its  department 
unions,  in  one  year  will  amount  to  $28,000,000.  If  all  the  other 
crops  would  contribute  in  like  portion  the  sum  would  be  multi- 
plied. It  will  not  require  an  enormous  sum  to  maintain  the  so- 
ciety and  its  marketing  machinery,  and  it  is  not  proposed  to  inflict 
any  unnecessary  tax  on  the  consumers.     The  farmers  will  only 

364 


demand  an  equitable  price,  which  will  be  a  profitable  price,  and 
the  expense  of  marketing  their  products.  Farmers  have  always 
in  the  past  paid  the  expense  of  marketing  other  people's  products 
in  the  prices  they  paid,  yet  have  often  taken  for  their  own  goods 
prices  less  than  cost  of  production. 

BENEFITS  TO  ALL. 

But  you  say,  Will  not  the  farmers'  success  in  pricing  their 
crops  impose  added  burdens  on  consumers  through  higher  prices  ? 

Not  necessarily  so.  Although  this  is  primarily  a  society  for 
farmers  and  for  agriculture,  yet  everything  that  farmers  do  to 
benefit  society  and  their  business,  and  all  that  they  can  do  with 
safety,  must  operate  to  benefit  every  class,  every  useful  industry, 
every  meritorious  institution,  and  every  person  doing  a  legitimate 
business.  For  instance,  if  farmers  are  deprived  of  a  fair  share 
of  the  wealth  they  produce,  all  other  industries  will  suffer  in 
equal  ratio.  If,  on  the  other  hand,  the  farmers  receive  a  fair  re- 
ward, their  gain  will  be  reflected  in  the  business  done  by  mer- 
chants, bankers,  professional  men,  laborers,  etc.,  all  down  the  line 
in  the  country,  towns  and  cities. 

FARMERS  CAN  ORGANIZE. 

Farmers  can  organize,  as  they  are  largely  organized  into  the 
American  Society  of  Equity  already;  they  will  pledge  all  their 
crops  to  their  society,  as  they  have  done  for  some  crops  already ; 
and  they  can  get  profitable  prices  of  their  own  setting,  as  they 
are  doing  it  for  important  crops  now.  And  who  will  deny  them 
the  right  to  do  these  things?  This  may  make  higher  prices  to 
consumers  on  some  crops  under  the  present  conditions  of  mar- 
keting. But  it  is  also  proposed  to  change  the  marketing  system, 
and  here  is  where  I  answer  your  last  question,  ''Will  not  the 
farmers'  success  in  marketing  their  crops  impose  added  burdens 
on  consumers  through  higher  prices  ?" 

BOTH  ENDS  EXPLOITED  BY  THE  MIDDLE. 

Under  the  old  system  of  marketing,  farmers  were  paid  too  lit- 
tle and  consumers  were  charged  too  much.  The  difference  went 
into  the  pockets  of  the  exploiters  between.  Thus,  wheat  that 
brought  the  producer  75  cents  or  less  reached  the  purchaser  in 
the  form  of  flour  and  bran  at  a  great  advance,  or  by  the  route  of 

365 


the  bakery  a  hundred  or  more  per  cent,  was  added.  Potatoes 
that  brought  the  producer  in  Michigan  20  cents  per  bushel,  cost 
the  consumer  75  cents  to  over  $1  in  distant  markets.  Corn  that 
brought  the  producer  35  to  40  cents  in  Iowa  or  Kansas  sold  to 
the  cotton  raisers  in  the  South  at  75  cents  to  $1.  Eggs  that  were 
bought  in  the  summer  from  the  farmers  at  12  cents,  came  out  of 
the  storehouses  owned  or  controlled  by  people  who  have  no  hens, 
in  winter,  at  30  to  50  cents.  The  same  way  with  poultry  and  but- 
ter. Apples  that  the  buyers  reluctantly  paid  20  cents  a  bushel  for 
in  the  fall  sold  at  $1  to  $1.50  in  a  few  months,  because  only  a 
part  of  the  large  crop  was  taken,  even  at  the  low  price,  and  the 
balance  left  to  freeze  in  orchards  so  those  stored  would  command 
high  prices. 

And  this  way  it  has  been  going.  As  I  have  said,  farmers  can 
organize.  They  can  price  their  goods  and  get  the  prices,  because 
the  other  people,  who  have  no  farms,  or  orchards,  or  flocks,  or 
herds,  cannot  do  without  the  farmers'  produce  a  single  day.  But 
when  in  this  powerful  position  they  will  not  be  unmindful  of 
consumers.  On  the  contrary,  the  farmers,  through  their  society, 
have  declared  as  follows : 

"Should  organized  consumers  in  any  of  the  labor  organizations 
decide  to  cultivate  friendly  and  trade  relations  with  the  producing 
class — farmers — and  for  this  purpose  decide  to  establish  agen- 
cies, exchanges,  etc.,  or  other  means  of  directly  meeting  the  pro- 
ducing classes  and  receiving  their  products  at  first  hand,  the 
American  Society  of  Equity  will  be  willing  to  co-operate  to  the 
end  that  consumers  may  secure  the  necessaries  of  life  at  equitable 
prices." 

RECOGNIZED  BY  THE  AMERICAN  FEDERATION  OF  LABOR. 

Already  organized  labor  has  recognized  the  benefits  of  co- 
operation with  this  society,  and  at  the  national  meeting  of  the 
American  Federation  of  Labor,  held  in  Minneapolis  in  1906,  res- 
olutions to  co-operate  with  the  American  Society  of  Equity  were 
passed.  President  Gompers,  of  the  American  Federation  of 
Labor,  and  an  officer  of  your  body,  in  referring  to  the  possibili- 
ties that  opened  up  through  such  co-operation,  voiced  the  senti- 
ment of  that  large  gathering  when  he  said :  , 

"The  very  presence  of  these  representatives  of  the  farmers  of 
our  country  bodes  the  greatest  good  of  our  people.  May  it  be  the 
harbinger  of  a  greater  swiftness  of  the  movement  for  the  pro- 
tection and  uplifting  of  our  common  people." 

366 


And  this  co-operation  will  not  be  confined  to  organized  laborers. 
It  is  the  duty  of  farmers  to  produce  for  all  the  people,  and  they 
will  gladly  do  it  at  equitable  prices.  Therefore,  the  same  spirit 
of  equity  in  dealing  and  fair  play  is  extended  to  all  consumers. 
Also,  it  is  not  the  intention  or  expectation  to  eliminate  the  middle- 
men, except  the  unfair  ones.  The  exploiters  who  cheat,  wilfully 
misrepresent  and  designedly  control  all  the  storage  space  and 
prevent  a  liberal  supply  being  held,  will  surely  have  to  go,  or  re- 
form. There  is  no  doubt  that  the  producers  organized  will  have 
much,  if  not  all,  to  say  about  what  is  a  fair  commission,  and  also 
what  is  a  fair  freight  rate,  etc.  And  when  they  have  the  or- 
ganized co-operation  of  the  consumers — and  I  hope  they  will  have 
soon,  as  it  looks  to  me  as  though  the  consumers  must  organize 
for  their  own  protection — there  will  be  a  power  created  that  will 
compel  the  middlemen  to  deal  in  equity  with  both  classes.  The 
farmers  are  as  much  interested  in  large  markets  as  in  profitable 
prices.  Therefore,  their  products  must  reach  the  consumers  in 
adequate  quantities  and  at  popular  prices. 

HOW  IT  WILL  BE  DONE. 

We  have  seen  many  illustrations  to  prove  that  competition  is 
the  law  of  industrial  death,  and  that  co-operation  is  the  law  of 
industrial  life.  Also  we  have  many  evidences  that  unorganized 
people  are  powerless,  and  when  organized  they  are  all-powerful. 

We  have  seen  the  transportation  companies  organize  and  bring 
certainty  of  rates  and  dividends  in  place  of  uncertainty.  We 
have  seen  the  steel  trust,  the  harvester  trust,  the  tobacco  trust 
and  others  organize  and  control  supply,  make  prices  and  compel 
definite  dividends.  We  see  practically  everything  the  masses  of 
the  people  produce  and  consume  controlled  by  a  combination  or 
trust,  while  the  masses  are  as  yet  only  partially  organized  and 
exert  their  power  only  to  a  very  limited  extent. 

More  unions  is  what  our  country  needs.  When  everything  and 
everybody  are  organized,  unionized  and  co-operating,  then  there 
will  be  no  weak  to  be  preyed  upon  by  the  strong,  and  we  will 
have  reached  the  millennium  of  our  social,  industrial  and  political 
existence.  This  is  the  object  of  the  American  Society  of  Equity. 
This  is  what  will  occur  when  the  masses  are  organized  into  an 
American  Society  of  Equity. 

The  American  Society  of  Equity  is  probably  the  first  institu- 
tion that  has  come  to  you  with  the  right  civic  spirit  throughout, 

367 


to  benefit  all  the  people,  and  is  not  trying  to  help  some  of  the 
people  at  the  expense  of  others.      •  ■    ■    - 

METHODS  OF  OPERATION. 

The  organized  forms  are  local  unions,  county  unions,  district 
unions  for  some  crops,  State  unions,  section  unions,  department 
unions,  and  a  national  union. 

When  the  society  is  completed  there  will  be  a  local  union  at 
each  important  shipping  town,  and  there  may  be  others ;  a  county 
union  in  each  agricultural  county;  a  State  union  for  each  State; 
a  department  union  for  crop  or  class  of  crops;  a  section  union 
for  groups  of  States,  and  the  national  union  at  the  head  of  all. 
Each  union  has  its  officers.  The  local  union  is  the  "workshop  of 
the  society."  It  is  made  up  of  producers  of  the  neighborhood. 
The  individual  producers  report  the  crops  they  have  to  sell  any 
day  (or  a  few  days  in  advance)  to  the  secretary  of  the  local. 
(Only  the  shipping  parts  are  reported.  Crops  for  home  con- 
sumption or  the  local  market  are  not  included.)  All  the  local 
unions  in  a  county  report  daily  to  the  county  union,  with  the  rail- 
roads the  supplies  are  on.  Thus  the  county  union  has  a  report  of 
all  the  grain,  cotton,  fruit,  vegetables,  wool,  hogs,  cattle  or  any 
crops  that  are  ready  for  market  any  day,  or  that  will  be  ready  on 
a  certain  day  in  the  near  future.  AH  the  county  unions  in  a  sec- 
tion will  make  their  reports  to  the  section  union  daily ;  conse- 
quently the  section  union  will  have  a  report  of  all  the  supply  of 
whatever  description  in  the  section,  and  will  know  what  railroads 
it  is  on. 

The  reporting  will  be  done  by  telephone,  or  telegraph,  or  mail, 
as  may  be  most  convenient  or  necessary.  Cypher  telegraphy  may 
be  resorted  to.  To  the  person  who  has  not  figured  the  plan  out 
this  may  look  stupendous,  and  some  will  say  "it  is  impracticable," 
but  let  us  see. 

It  is  proposed  to  divide  the  country  into  seven  sections  to  facil- 
itate reporting  and  directing  marketing.  The  average  number  of 
counties  to  a  section  will  be  430.  But  we  will  take  what  is  called 
Section  2  and  comprises  the  States  of  Illinois,  Wisconsin,  Michi- 
gan, Indiana,  Ohio  and  Kentucky.  In  this  section  there  are  653 
counties.  Therefore,  it  means  653  telephone  or  telegraph  mes- 
sages to  get  a  complete  report  of  all  the  crops  ready  for  market, 
or  to  be  ready  soon,  to  the  section  headquarters,  which  will  be  at 
Chicago.  There  is  nothing  impossible  or  impracticable  about  this. 
There  are  many  business  houses  that  receive  as  many  messages 

368 


daily,  and  it  is  nothing  to  compare  with  the  messages  and  details 
necessary  to  keep  a  railroad  system  working. 

True,  this  is  only  one  part  of  the  duty  of  the  section  union. 
The  others  are  to  receive  reports  of  demand,  and  to  direct  the 
supply  to  meet  the  demand. 

I  have  shown  how  simple  and  practicable  it  will  be  to  report 
the  supply  down  to  the  local  and  county  unions  in  the  section 
union.  It  will  be  just  as  simple  and  practicable  to  get  reports  of 
the  demand.    To  explain  : 

The  American  Society  of  Equity  will  open  offices  in  all  the 
principal  market  cities,  notify  the  handlers  and  consumers  of  the 
location  of  these  offices,  and  wait  for  the  demand  to  come  to  these 
offices.  But,  you  say,  "the  demand  may  not  come."  Remember, 
the  crops  are  pledged  to  the  society  to  direct  the  marketing.  In- 
dependent, or  competitive,  marketing  is  at  an  end.  Hence,  the 
only  place  to  get  supplies  of  farm  products  will  be  through  the 
society  and  its  representatives.  You  can  imagine  that  the  buyers 
cannot  hold  out  long,  and  that  it  will  not  be  necessary  to  canvass 
for  orders.  We  must  admit  that  the  farmers  have  an  advantage 
over  all  other  classes  of  producers  in  the  fact  that  their  goods 
are  absolutely  essential.  Therefore,  if  they  tie  them  up  for  a 
definite,  profitable,  equitable  price,  and  make  their  society  their 
selling  agent,  the  demand  must  seek  that  agent. 

Each  market  representative  will  telegraph  the  report  of  demand 
from  his  market  daily.  Thus,  the  section  union  will  have  a  com- 
plete report  of  all  farm  produce  available  for  each  day,  know 
where  it  is  and  on  what  railroad  it  is.  Likewise  a  report  of  the 
demand,  and  exactly  where  it  is.  This  allows  me  to  announce 
the  following: 

AXIOMATICAL  TRUTHS. 

When  we  know  the  supply  and  where  it  is,  when  we  know  the 
demand  and  where  it  is,  what  can  be  simpler  than  to  direct  the 
supply  to  equal  the  demand? 

Then  all  markets  will  get  what  they  need,  and  no  more.  Gluts 
and  consequent  losses,  will  be  unknown.  Maximum  sales  will 
be  made.    . 

Producers  will  get  their  price  on.  all  they  sell,  and  no  necessary 
handler  will  be  dispensed  with  or  business  disturbed,  but  they  will 
be  required  to  serve  the  people  on  equitable  terms,  thus  reducing 
the  prices  to  consumers. 

The  directing  of  the  supply  by  the  section  union  will  be  just 

369 


the  reverse  of  reporting  the  supplies  through  the  county  and  local 
unions. 

I  have  been  thus  explicit  in  describing  the  marketing  machine 
of  the  American  Society  of  Equity,  while  necessarily  omitting 
some  of  the  other  details  in  this  address,  so  as  to  establish  the 
practicability  of  the  plan,  and  convince  my  hearers  that  all  we 
claim  can  be  accomplished.  To  direct  the  marketing  of  all  farm 
crops  will  not  require  as  large,  or  as  complicated,  or  as  expensive 
a  machine  as  some  railroad  systems  have  now,  because  we  have 
the  advantage  that  the  farmers'  goods  cannot  be  done  without 
for  even  a  little  while,  while  everything  else  can  be  done  without 
for  a  time,  and  some  of  them  all  the  time.  I  want  to  place  the 
movement  represented  by  the  American  Society  of  Equity  before 
this  body  of  people,  representing  practically  all  our  industrial, 
social  and  political  activities,  so  they  may  understand  it,  because 
it  is  the  most  significant  event  of  the  present  generation,  and  no 
individual  can  afford  to  ignore  it,  and  all  should  make  calculations 
on  its  rise.  It  is  a  power  now,  and  is  a  greater  power  as  each 
month  passes  by.  It  is  contesting  in  the  fields  economic  and 
politic  for  recognition,  not  by  brute  force,  but  through  its  numeri- 
cal strength,  demanding  equity  and  equal  rights  for  all. 

MR.  JAMES  F.  TRATTMAN  (Wisconsin)  :  Mr.  Chairman— 
I  desire  to  offer  some  resolutions  on  the  labor  organizations  and 
the  relations  of  aggregate  wealth  to  the  individual. 

MR.  REYNOLDS— I  would  ask  that  the  resolutions  be 
read  and  submitted  at  once. 

Mr.  James  F.  Trattman  then  offered  and  read  the  following 
resolutions : 

Resolved,  That  this  convention  hereby  declares  its  sympathy 
with  all  earnest  and  honest  effort  which  makes  not  only  for 
equality  in  privilege,  but  also  for  actual  equality  among 
men,  and  that  we  commend  the  efforts  of  labor  organizations 
throughout  the  country  in  their  attempts  to  improve  the  moral, 
material  and  intellectual  condition  and  surroundings  of  their 
fellow  men. 

Further  Resolved,  That  we  recognize  these  labor  organiza- 
tions, wherever  they  seek  by  righteous  and  lawful  means  to  up- 
lift their  members  and  fellow-workers,  as  powerful  agents  for 
good  in  our  economic,  social  and  political  development,  but  we 
deplore  as  harmful  and  dangerous  to  our  republican  institutions 
and  to  all  citizens  alike,  every  resort  to  violence  or  lawlessness 

370 


by  these  organizations,  whether  practised  secretly  or  in  open  de- 
fiance of  law,  we  therefore  recommend  this  subject  to  the  earn- 
est consideration  of  Congress. 

Further  Resolved,  That  the  unrestricted  right  of  the  individu- 
al, under  the  law,  to  acquire  and  own  property  without  limit 
in  amount  or  kind,  is  gathering  the  natural  and  created  wealth 
of  this  country  into  the  hands  of  the  few,  is  establishing  an 
oligarchy  of  wealth,  is  turning  over  our  Government  into  the 
hands  of  the  rich,  is  a  menace  to  our  free  institutions,  and 
should,  if  feasible  and  possible,  be  curtailed. 

Therefore,  Further  Resolved,  That  we  recommend  to  Con- 
gress the  appointment  of  a  suitable  and  impartial  commission 
to  investigate  the  subject  of  the  right,  under  the  law,  to  acquire, 
own  and  transmit,  by  will  or  under  inheritance  laws,  lands  and 
personality  in  unlimited  quantities  and  kinds,  and  to  report  their 
recommendations  and  conclusions  as  to  whether  it  is  feasible 
and  possible,  without  danger  to  our  institutions  or  welfare,  to 
limit  or  curtail  this  right,  by  preventing  the  acquiring  of  owner- 
ship by  the  individual  of  lands  or  personally  beyond  certain 
amounts,  and  by  forbidding  the  transmission,  by  will  or  inheri- 
tance laws,  of  lands  or  personality  in  unlimited  amounts  to  a 
single  individual. 

In  response  to  the  request  that  resolutions  be  handed  to  the 
secretary,  the  following  were  presented : 

By  Mr.  P.  J.  Guerin  (Massachusetts). 

Resolved,  That  this  conference,  believing  that  the  best  interests 
of  the  public  would  be  subserved  by  the  Federal  control  of  the 
railroads  and  transportation  companies,  desires  to  be  recorded  as 
in  favor  of  that  view  of  the  question. 

By  Mr.  J.  E.  Leavitt,  on  behalf  of  the  Board  of  Trade  of  Lynn, 

Mass. 

Resolved,  That  any  combination  or  organization  of  individuals 
whose  acts  may  control  the  price,  production  or  traffic  in  any 
article  of  common  use  or  necessity,  whether  labor,  manufactured 
article  or  other  product,  in  any  State  other  than  wherein  it  is  or- 
ganized, shall  be  required  to  incorporate  under  the  Federal  laws, 
and  thus  be  amenable  to  the  Federal  Government  for  any  abuse 
of  its  power. 

By  Mr.  C.  J.  Traxler  (Minnesota). 

Whereas,  The  so-called  Sherman  Anti-Trust  Act  has  been 
proven  to  be  a  detriment  rather  than  benefit  to  the  development 
of  American  industries ;  and 

37i 


Whereas,  The  same  operates  more  to  restrain  honest  men  and 
honest  enterprises  than  to  prevent  or  control  monopolistic  and 
harmful  organizations;  therefore  be  it 

Resolved,  That  we  petition  and  recommend  our  Senators  and 
Representatives  in  Congress1  assembled  to  repeal  Section  I  of  said 
act,  and  to  re-enact  the  same  so  that  the  gist  of  the  offense  shall 
be  some  harmful  result  to  the  public; 

Resolved,  That  we  recommend  that  no  agreement,  contract, 
combination  or  pool  shall  be  deemed  harmful,  within  the  mean- 
ing of  such  act,  that  does  not  operate  to  the  actual  injury  to  the 
public,  or  that  does  not  produce  to  the  participants  more  than  10 
per  cent,  net  on  any  sale  or  transaction. 

By  Hon.  P.  J.   Grosscup   (Illinois). 

Resolved,  That  the  corporate  form  of  wielding  the  nation's  in- 
dustrial energies  is  a  necessity  of  our  times,  and  that  it  is  time  to 
quit  its  indiscriminate  denunciation.  We  believe  that,  both  from 
the  standpoint  of  the  political  economist  and  of  the  statesman,  the 
supreme  corporate  problem  now  before  the  country  is  not  how  to 
destroy  the  corporation,  nor  how  to  hamper  it,  but  how  to  so 
reform  and  rebuild  the  corporation,  that  it  may  become  a  trust- 
worthy medium  through  which  the  universal  American  instinct 
to  have  some  individual  part  in  the  property  of  his  country  may 
find  a  way  to  work  itself  out.  And  to  that  end  we  ask  the  national 
government  to  take  the  lead; 

By  Hon.  Avery  C.  Moore  (Idaho). 

Resolved,  That  this  conference  is  in  hearty  accord  with  the 
trust  policy  of  President  Roosevelt. 

B$  Mr.  Allen  Ripley  Foote  (Ohio). 

Resolved,  That  the  Congress  of  the  United  States  be  recom- 
mended to  enact  a  law  denying  the  privileges  of  interstate  com- 
merce to  corporations,  under  the  laws  of  whatever  State  incor- 
porated, that,  own  or  hold  the  stock  of  other  corporations. 

By  Prof.  F.  W .  Taussig  (Massachusetts). 

Commend  Federal  administration  for  vigorous  action.  Public 
opinion  endorses  it  unreservedly.  Vindication  of  supremacy  of 
law. 

Commend  Bureau  of  Corporations  for  skill,  energy,  successful 
uncovering  of  evils. 

Commend  Interstate  Commerce  Commission. 

Recommend  separation  of  trust  and  railway  problems.  Inter- 
state Commerce     Commission  alone  to  supervise  railways  and 

372 


Interstate  Commerce  Commission  Act  alone  to  apply  to  them. 
Bureau  of  Corporations  alone  to  deal  with  trusts. 

Revision  of  Sherman  Act  necessary.  Federal  control  of  in- 
dustrial trusts,  requirement  of  publicity,  regular  reports,  super- 
vised accounting. 

A  commission  at  next  session  of  Congress  to  investigate  and 
to  report  detailed  legislation. 

By  West  End  Business  Men's  League  of  St.  Louis. 

Whereas,  We  deeply  deplore  the  antagonisms  and  contro- 
versies now  existing  between  the  United  States  and  the  several 
States  over  questions  of  interstate  traffic ;  and 

Whereas,  We  regret  that  there  should  be  occasion  for  the  peo- 
ple of  the  several  States  to  thus  quarrel  and  contend  with  them- 
selves as  the  people  of  the  United  States ;  and 

Whereas,  We  believe  that  the  power  and  duty  for  the  proper 
and  happy  solution  of  these  controversies  rests  with  the  people 
themselves,  and  that  such  solution  should  be  found  at  the  earliest 
possible  moment;  and 

Whereas,  We  further  believe  that  such  a  result  may  be  best  and 
soonest  brought  about  by  the  meeting  of  the  people,  through  the 
agency  of  truly  representative  delegates,  in  a  joint  national  and 
State  convention ;  therefore 

Resolved,  We  favor  the  calling  and  holding  of  a  joint  national 
and  State  convention,  composed  of  delegates  representative  of 
nation  and  State,  and  of  our  various  social,  commercial  and  in- 
dustrial interests,  such  convention  to  be  called  by  and  held  under 
the  auspices  of  the  President  of  the  United  States  and  the  Gov- 
ernors of  the  several  States ;  and 

Resolved,  That  we  hereby  respectfully  petition  the  President 
and  Governors  to  call  and  provide  for  the  holding  of  such  a  con- 
vention at  such  a  time  and  place  and  in  such  a  manner  as  they 
may  determine. 

MR.  REYNOLDS — I  am  requested  to  remind  the  gentlemen 
who  are  members  of  the  Committee  on  Resolutions  that  the 
general  committee  will  meet  at  8  o'clock,  Room  200,  Hotel 
Stratford. 

Upon  motion,  the  conference  was  then  adjourned  until  2  p.  m. 


373 


Eighth  Session,  October  24,  2:30  P.  M. 

The  eighth  session  of  the  conference  was  called  to  order  at 
2  30  P.  M.  by  Mr.  Marcus  M.  Marks. 

THE  CHAIRMAN:  The  first  speaker  this  afternoon  will  be 
Dr.  F.  W.  Taussig,  Professor  of  Economics  in  Harvard  Uni- 
versity, the  title  of  whose  paper  is  "What  Next?" 
Prof.  F.  W.  Taussig. 

Mr.  Chairman— The  ground  that  was  covered  by  Commissioner 
Smith  in  his  address  this  morning  is  identically  about  the  ground 
I  propose  to  cover  this  afternoon.  Perhaps  fortunately  for  you, 
but  unfortunately  for  me,  the  conclusions  which  the  academic 
mind  has  reached  upon  the  subject  are  almost  identical  with  those 
which  have  been  reached  by  the  practical  administrator.  I  there- 
fore cannot  offer  anything  new  to  you,  and  yet  it  is  perhaps  not 
without  significance  that  the  student  of  economics  should  come 
out  just  where  the  experienced  administrator  comes  out. 

ATTACKS  ON  TRUSTS  HAVE  BEEN  USEFUL. 

This  is  a  period  of  attacks  upon  the  trusts,  or,  to  use  the  news- 
papers' phrase,  of  trust  busting.  Both  the  States  and  the  Fed- 
eral Government  are  moving  upon  the  large  combinations  The 
Federal  Government  has  carried  through  its  attack  on  the  rail- 
way combination  in  the  Northwest  and  has  secured  the  dissolu- 
tion of  the  Northern  Securities  Company.  It  is  moving  upon 
the  Oil  Trust  and  on  the  Tobacco  Trust  and  we  can  hardly 
doubt  that  proceedings  against  other  combinations  are  in  course 
of  preparation.  The  States  show  no  less  activity  in  action 
toward  the  dissolution  or  expulsion  of  offending  combinations. 

All  this  is  good,  good  certainly  as  far  as  it  goes.  It  is  a  sign 
of  an  awakened  public  feeling,  of  a  strong  determination  to 
grapple  with  the  problem  in  earnest.  The  community  is  aroused. 
Not  only  the  great  mass  of  laborers  and  farmers  press  for  action 
of  some  sort,  but  the  middle  classes,  the  merchants,  manufac- 
turers, business  men,  so  far  as  they  are  not  themselves  inter- 
ested in  some  form  of  combination,  approve  the  general  trend. 
This  pressure  is  good  not  merely  as  a  sign  of  awakened  public 

374 


feeling — it  is  good  also  because  it  is  a  necessary  stage  in  the 
progress  of  reform.  Without  some  drastic  action  many  of  the 
great  corporations  themselves  could  not  be  brought  to  face 
squarely  the  new  situation.  Their  leaders  are  so  used  to 
control,  so  intoxicated  with  power,  so  beset  by  megalomania, 
that  nothing  less  than  serious  attack  will  accomplish  anything. 
They  talk  glibly  of  reasonable  regulation.  They  admit  the  prin- 
ciple of  considering  the  rights  of  the  public.  They  say  they  ob- 
ject to  unreasonable  regulation  and  to  confiscation.  In  fact, 
they  wish  for  no  regulation  at  all.  They  wish  the  old  conditions 
to  last  as  long  as  possible  and  with  as  little  disturbance  as  pos- 
sible. They  will  quibble,  evade,  conceal,  pretend  to  conform,  | 
profess  ignorance  of  things  which  they  must  know,  emasculate 
legislation,  use  every  subterfuge  and  delay  which  the  law  allows. 
They  often  do  this  stupidly,  with  pretenses  so  obvious  and  af- 
fectation of  ignorance  so  absurd  as  to  forfeit  any  claim  to  con- 
siderate treatment.  They  need  to  be  scared.  Until  they  are 
thoroughly  scared,  little  in  the  way  of  betterment  in  their  policy 
or  of  faithful  consideration  of  public  rights  can  be  expected. 
This  is  by  no  means  true  of  all  the  great  corporations ;  but  it  is 
true  of  many  among  them. 

Not  only  this.  Vigorous  attack,  proceedings  for  legislation, 
heavy  fines  and  penalties  seem  to  be  the  indispensable  steps  for 
getting  light.  Just  what  some  of  the  great  combinations  have 
clone,  just  what  are  the  means  by  'which  they  have  obtained 
commanding  control,  just  how  great  have  been  their  profits, 
how  far  the  profits  have  exceeded  a  reasonable  return  for  capital 
and  energy  and  risk — on  all  these  essential  questions  we  are 
often  bare  of  information.  That  information  it  seems  will  not 
be  given  in  most  cases  except  under  severe  compulsion.  Serious 
menace  and  some  injury  seem  to  be  essential  in  order  to  secure 
needed  information. 

EFFECTS  ON  BUSINESS  EXAGGERATED. 

No  doubt  scaring  the  combinations  is  bad  for  business,  or  at 
least  for  some  kinds  of  business.  It  does  shake  confidence  in 
enterprises  holding  an  important  place  in  our  industrial  organ- 
ization and  it  contributes  to  a  feeling  of  uneasiness  in  financial 
quarters.  Very  likely  it  is  a  factor  in  leading  to  a  decline  in 
quotations  of  securities  and  to  a  possible  halt  in  business  activ- 
ity. In  my  judgment,  it  is  not  the  main  factor  or  even  a  ven 
important  factor.    There  is  a  tendency  to  make  the  administra- 

375 


tion  a  scapegoat.  The  tips  and  downs  in  business  succeed  each 
other  with  little  regard  for  legislative  or  administrative  doings. 
Speculative  activity  such  as  we  have  had  in  the  last  three  years 
is  sure  in  any  case  to  be  succeeded  by  a  pessimistic  reaction. 

All  this  serves  to  justify  the  course  of  the  administration,  of 
the  Federal  authorities,  of  the  State  Legislatures  and  Commis- 
sions. But  it  justifies  their  course  only  so  far.  It  may  seem 
paradoxical  after  what  I  have  just  said,  but  it  is  none  the  less 
true  and  consistent,  that  the  present  course  of  legislation  in  the 
community  is  not  tenable  and  can  lead  to  little  permanent  good. 
Rightly  considered,  it  is  only  a  provisional  move.  It  is  a  re- 
connaissance in  force,  not  a  real  attack  on  the  problem. 

COMBINATION  IRRESISTIBLE  IN  CERTAIN  LINES. 

My  ground  for  saying  this  is,  to  put  it  in  a  word,  that  the 
movement  toward  combination  is  in  many  directions  irresistible. 
I  do  not  believe  it  is  inevitable  and  irresistable  in  all  directions, 
nor  do  I  look  forward,  as  the  Socialists  do,  to  an  industrial 
system  in  which  all  industries  will  be  centralized  under  single 
management  and  control.  Over  the  greater  part  of  the  activity 
of  the  community  we  shall  continue  to  have  independent  and 
competing  producers.  But  in  a  considerable  number  of  indus- 
tries, large  scale  production  and  large  scale  operation,  huge 
plants  and  interrelated  plants  bring  so  great  economy  and  ef- 
ficiency that  the  great  monopolistic  combinations  are  bound 
to  make  their  way. 

To  repeat,  I  would  not  press  this  reasoning  too  far.  The  ad- 
vantages of  large  scale  production  are  not  without  their  limits. 
People  often  confound  the  true  advantages  of  large  scale  pro- 
duction with  the  tactical  advantages  and  the  swelling  profits 
which  come  from  monopoly.  In  a  great  array  of  industries,  such 
as  textiles,  boot  and  shoe  manufacturing,  wood  working,  metal 
working,  a  host  of  others,  the  stage  of  maximum  efficiency  is 
reached  far  short  of  all  embracing  combination.  No  hastening 
beyond  this  stage  is  desirable.  Let  us  do  all  we  can  to  keep 
development  within  this  stage.  Hence  all  measures  for  keeping 
the  way  clear  for  independent  producers  are  good.  Such  is 
legislation  promoting  free  competition,  defining  more  rigidly 
unfair  competition,  proscribing  mere  browbeating;  not  least,  a 
square  deal  by  the  railways,  with  equal  rates  and  no  favors  or 
discriminations. 

376 


But  after  all  this  is  done,  there  will  still  remain  industries 
which  will  attain  the  stage  of  combination  and  of  virtually  com- 
plete monopoly.  The  great  conspicuous  example  is  the  oil  in- 
dustry. Whatever  may  have  been  the  artificial  causes  of  the 
origin  and  early  development  of  the  oil  monopoly,  through  the 
manipulation  of  railway  rates  and  the  helplessness  of  railways  in 
competition  with  each  other,  the  tendency  toward  single  man- 
agement and  ownership  seems  to  me  to  have  become  inevitable 
with  the  pipe  line.  Legislation  may  provide  that  pipe  lines  shall 
be  common  carriers,  and  rival  pipe  lines  may  be  encouraged. 
Yet  this  stage  in  the  mechanical  development  of  the  industry 
seems  to  me  to  make  combination  inevitable.  Sooner  or  later 
rival  pipe  lines  will  combine,  the  industry  necessarily  will  come 
under  the  control  of  those  owning  the  unique  transportation 
facilities,  the  common  carrier  provision  will  prove  illusory.  The 
lesson  of  gas  supply  in  the  cities  seems  to  me  conclusive.  When 
once  a  great  expensive  plant  of  pipes  is  essential  for  the  success- 
ful conduct  of  the  business,  and  suffices  for  the  conduct  of  the 
whole  of  the  business,  combination  and  monopoly  are  inevitable 
The  hands  of  the  clock  cannot  be  made  to  go  backward. 

EFFORTS  TO   IMPEDE  COMBINATION   LARGELY  FUTILE. 

What  follows?  That  prohibition,  penalizing,  dissolution,  trust 
busting  are  hopeless  as  a  permanent  policy.  The  fact  of  combi- 
nation and  of  monopoly  tendency  must  be  faced.  The  present 
drastic  measures  must  be  regarded  as  opening  the  way  not  to 
the  restoration  of  competition  or  the  final  destruction  of  combi- 
nations, but  to  the  co-operation  of  the  combinations  with  the 
public.  They  should  prepare  the  way  for  a  better  and  higher 
plane  of  management  for  the  combinations. 

The  proofs  of  the  case  are  indicated  by  the  railway  situation. 
In  one  essential  respect  our  policy  toward  the  railways  for  the 
last  twenty  years  has  been  wrong,  and  is  admitted  to  have  been 
wrong  by  the  great  majority  of  sober  and  serious  students  of 
railway  problems.  By  the  Interstate  Commerce  acts  we  pro- 
hibited pools  and  agreements,  and  by  the  Sherman  Act  of  1890 
that  prohibition  was  made  even  more  drastic.  We  have  tried  to 
keep  competition  alive  artificially.  The  result  has  been  that  we 
have  maintained  some  of  its  unhealthy  effects  but  have  secured 
very  few,  if  any,  of  its  good  effects.  We  have  simply  caused 
combination  to  take  new  forms,  to  conceal  itself,  and  to  become 
more    difficult   of    supervision.      We   have    not   prevented — we 

377 


have  simply  driven  it  into  hiding.  That  the  prohibition  of  pool- 
ing in  the  Interstate  Commerce  Act  was  a  mistake  has  now  been 
repeatedly  stated  by  the  Interstate  Commerce  Commission 
itself.  It  has  recommended  that  pooling  be  permitted  under  su- 
pervision. Let  the  railways  be  authorized  to  combine  and  co-oper- 
ate, but  let  them  do  it  in  the  open.  Quite  apart  from  the  special 
consideration  that  this  sort  of  common  action  will  help  in  doing 
away  with  secret  favors  and  rebates,  it  will  facilitate  general  pub- 
lic supervision  of  railways,  it  will  promote  co-operation  between 
the  railways  and  public  authority,  will  encourage  good  service 
and,  not  least,  will  give  the  dog  his  due. 

Considering  how  the  consolidation  of  railways  has  proceeded 
apace  since  1887,  it  is  often  said  that  our  legislation,  while  it  has 
attempted  to  prevent  railway  combination,  has  in  fact  promoted 
it.  I  am  by  no  means  sure  that  as  much  as  this  can  be  made  out. 
But  certainly  competition  among  the  railways  has  not  been 
made  more  effective.  In  the  Northern  Securities  case,  the  Gov- 
ernment won  a  tactical  victory.  The  security  holding  corpora- 
tion was  dissolved.  Substantially,  nothing  was  accomplished. 
The  unification  of  ownership  and  control  remains  precisely  as  it 
was  before.  But  it  is  concealed,  or  at  least  takes  place  by 
methods  which  the  law  finds  it  virtually  impossible  to  prevent; 
and  it  makes  supervision  not  more  easy,  as  it  ought  to  do,  but 
more  difficult.  The  principles  which  are  applicable  to  railway 
combinations  are  applicable  to  the  trusts  also.  The  mere  act  of 
combination  should  not  be  subject  to  legal  penalty.  Secret  com- 
bination should  be  hounded  down.  Where  there  is  concealment 
or  mendacity,  bring  pressure  to  bear,  by  court  proceedings,  dis- 
solution, criminal  prosecution.  But  say  to  those  that  aim  at 
large  scale  combinations — if  you  will  do  it  in  the  open,  we  will 
not  only  let  you  combine  but  we  will  give  you  a  firm  legal  basis 
and  we  will  welcome  co-operation  with  public  authority. 

SUGGESTIONS  FOR  A  FUTURE  POLICY. 

A  general  policy  of  this  sort  calls,  however,  for  wise  considera- 
tion of  details.  To  enter  upon  those  details  would  go  far  beyond 
the  scope  of  the  present  paper,  and,  indeed,  in  many  respects,  far 
beyond  any  competence  I  can  pretend  to.  The  main  outlines  on 
which  it  must  proceed,  however,  seem  to  me  obvious.  They  are 
somewhat  as  follows: 

1.  Federal  incorporation  and  Federal  regulation   are  indis- 

378 


pensable.  The  day  has  passed  when  the  individual  States  can 
cope  with  the  problems  involved.  The  Federal  Government 
must  take  hold.  Whether  we  like  it  or  not,  we  must  look  to  a 
great  enlargement  of  its  scope  and  power. 

2.  We  must  have  careful  legislation  and  not  slap-dash  legis- 
lation. The  Sherman  Act  of  1890  and  most  of  the  statutes 
passed  by  the  several  States  may  be  fairly  described  as  slap-dash 
legislation.  The  mere  preparation  of  careful  regulative  legisla- 
tion will  call  for  a  high  legal  skill  and  for  extreme  care  as  to  de- 
tails. It  is  always  subject  to  emasculation  by  amendment  at 
the  hands  of  corrupt  or  semi-corrupt  legislatures.  One  indis- 
pensable step  to  progress  is  that  the  people  shall  send  to  Con- 
gress Senators  and  Representatives  who  are  trying  to  grapple 
with  the  problem  in  good  faith. 

3.  Careful  administration  and  continuity  in  administration 
are  called  for.  The  Bureau  of  Corporations  has  made  an  ex- 
cellent beginning.  Both  this  bureau  and  the  Interstate  Com- 
merce Commission  must  be  completely  divorced  from  partisan 
politics  and  must  be  officered  by  able,  upright  and  experienced 
men.  The  term  of  service  should  be  irrespective  of  changes  in 
the  Presidential  office,  and  the  positions  should  be  made  dig- 
nified and  attractive  both  in  salary  and  in  permanence  of  service. 

4.  Time  and  experience  must  be  awaited.  The  precise  mode 
of  regulation,  the  extent  of  the  publicity  required,  the  mode  in 
which  the  Government  and  the  combinations  shall  co-operate — 
these  things  cannot  be  worked  out  in  a  year  or  in  a  decade. 
We  must  make  up  our  minds  that  we  have  a  long  and  difficult 
problem  before  us,  that  the  ways  and  means  of  meeting  it  can- 
not be  learned  in  advance.     The  public  must  learn  to  be  patient. 

5.  Finally,  the  public  must  recognize  the  fact  that  money 
making  is  not  necessarily  bad.  Large  results  are  not  to  be 
achieved  without  large  efforts  and  large  risks,  and  the  fact  that 
a  combination  is  profitable  does  not  necessarily  prove  that  it 
takes  undue  advantage.  The  community  must  accept  the  fact 
that  something  more  than  mere  interest  on  capital  is  necessary 
to  induce  the  taking  of  risks  and  to  bring  about  the  keenest 
exercise  of  business  ability.  Again,  give  the  dog  his  due,  even 
though  we  will  no  longer  let  him  have  more  than  his  due. 

THE  CHAIRMAN :  We  shall  now  be  addressed  by  a  gentle- 
man who  can  certainly  be  said  to  be  a  practical  man,  Mr.  George 

379 


H.  Barbour,  President  of  the  Michigan  Stove  Works,  of  De- 
troit, Michigan. 

Mr.  George  H.  Barbour. 

Mr.  Chairman — Prior  to  last  evening  I  had  about  come  to  the 
conclusion  that  we  were  to  have  but  one  side  of  the  subject  that 
was  to  be  discussed,  but  after  hearing  Mr.  Dawes  I  changed  my 
opinion  and  decided  the  ball  was  open. 

It  was  my  privilege  to  attend  the  bankers'  meeting  at  Atlan- 
tic City  a  few  weeks  ago,  and  among  the  speakers  there,  one 
of  the  most  interesting  whom  I  listened  to,  was  the  president 
of  one  of  the  leading  railroads  of  this  country,  whose  word  had 
a  great  deal  of  weight.  He  made  one  or  two  statements,  and 
one  particular  statement  regarding  the  financial  condition  of 
this  country,  which  I  thought  of  a  great  deal  of  importance. 
He  said  the  main  cause,  in  his  opinion,  of  the  financial  difficulty 
that  we  were  having  was  because  the  American  people  had 
become  so  extravagant.  He  followed  that  statement  by  saying 
that  during  the  last  year  (meaning  the  present  year)  there  had 
been  over  $400,000,000  spent  for  automobiles  in  this  country. 
That  amount  may  seem  very  large  to  you ;  I  thought  so  at  the 
time,  and  knowing  the  gentleman,  I  saw  him  personally  and 
asked  him  if  he  were  not  mistaken  in  that  amount.  He  said  he 
had  given  it  very  careful  consideration,  and  with  the  amount 
of  American  automobiles  and  those  of  foreign  make  he  thought 
he  was  very  conservative. 

BENEFITS  OF  COMBINATION. 

You  have  been  addressed  principally  by  the  learned  profes- 
sion, known  as  "lawyers,"  which  I  have  the  greatest  respect  for. 
At  my  home  some  of  my  warmest  friends  are  lawyers  and  I  re- 
spect them  and  hold  them  in  the  highest  esteem,  but  on  the 
general  subjects  of  the  day,  those  which  confront  us  at  the  pres- 
ent time,  I  do  not  hesitate  to  say  that  I  am  not  willing  to  give 
them  or  their  opinion  to  exceed  50  per  cent  of  the  argument. 
There  is  a  business  side  to  the  subjects  that  have  been  presented 
here.  I  am  not  so  sure  that  the  combination  of  interests  is  such 
a  danger  and  presents  so  bad  a  condition  of  things  as  has 
been  pictured.  I  take  issue,  and  believe  in  many  instances 
combination  of  interests  have  proven  of  inestimable  value  to 
many.  I  cite,  if  you  please,  the  United  States  Steel  combina- 
tion which  I  have  had  personal  dealings  with,  and  I  have  made 

380 


comparison  of  the  conditions  before  the  United  ,  States  Steel 
Corporation  was  in  existence  and  since,  and  I  say  to  you  without 
fear  of  contradiction  that  their  methods  of  doing  business  and 
results  accomplished  have  been  far  more  satisfactory  than  was 
the  condition  prior  to  their  existence.  Since  their  organization 
the  material  which  they  use  largely  of  (iron  and  steel)  has  in- 
creased in  price,  they  have  paid  to  labor  a  high  scale  of  wages, 
but  with  this  condition  their  manufactured  product  has  been  sold 
at  a  fair  price,  and  I  do  not  hesitate  to  say  at  a  lower  price  than 
if  the  individual  concerns  which  they  now  control  had  continued 
as  before  the  combination  was  formed.  The  question  may  be 
asked  how  were  they  able  to  do  this.  My  answer  is,  by  taking 
advantage  of  the  large  output  they  were  able  to  control  by  regu- 
lating and  having  a  steady  market,  a  combination  of  circum- 
stances that  any  one  individual  concern  could  not  accomplish. 
Reference  is  often  made  to  the  Standard  Oil  Company  methods. 
I  am  willing  to  admit  they  are  a  monopoly,  if  you  choose  to  so 
consider  them,  but  I  believe,  and  always  have  believed  that  the 
consumers  of  their  product  have  always  been  able  to  purchase 
the  same  at  a  reasonable  price  and  at  a  lower  price  than  if  the 
business  had  been  what  is  termed  on  an  "open  market."  And  why 
do  I  say  this?  As  a  manufacturer  my  experience  has  taught  mc 
that  to  make  a  success  of  any  business  you  are  engaged  in,  you 
must  have  volume,  and  here  we  come  to  the  point  of  the  small 
manufacturer  doing  a  business,  say  of  $500,000  against  a  com- 
petitor in  the  same  line  doing  a  business  of  $1,500,000.  If  the 
concern  is  doing  a  business  of  $500,000  and  their  general  ex- 
penses are  15  per  cent  and  I  am  able  to  do  a  business  of  $1,500, 
000  (three  times  the  amount)  do  you  for  a  moment  think  my  ex- 
penses would  be  three  times  the  amount,  or  45  per  cent? 
Nothing  of  the  kind.  I  would  come  nearer  doing  my  increased 
amount  on  5  per  cent,  which  is  only  one-third  of  the  amount. 
This  is  where  the  consolidation  of  interests  tells,  bringing  the 
fixed  amount  of  expenses  down  to  the  minimum,  which  the 
volume  of  business  enables  them  to  do.  By  this  consolidation 
who  suffers?  Does  the  manufacturer  who  purchases  the  product 
of  the  combination  of  interests?  I  say  no.  Do  the  employes 
suffer?  No.  Their  condition  is  improved.  Then  who  are  the 
suffering  ones?  I  know  not  of  them.  If  you  do,  I  would  like 
you  to  name  them.  I  am  inclined  to  think  that  combinations  of 
interests  are  many  times  misunderstood  by  the  general  public, 
by  their  coming  to  conclusions  without  a  thorough  knowledge 

381 


of  the  situation.  I  say  to  you,  I  have  had  general  experience  in 
dealing  with  combinations  in  the  purchase  of  their  product,  and 
what  I  have  said  to  you  is  based  on  this  experience. 

RAILROAD  INVESTMENT  SHOULD  HAVE  A  FAIR  RETURN. 

Now  a  word  concerning  railroads.  Is  it  not  natural  for  all  of 
us  engaged  in  any  business  to  do  our  best  to  get  a  reasonable 
profit  from  the  business  we  are  engaged  in — does  not  the  com- 
mon law  grant  us  this  privilege,  provided  we  conduct  our 
business  along  business  lines,  represent  our  products  honestly 
and  treat  those  with  whom  we  do  business  fairly  and  justly? 
In  considering  railroads,  I  care  not  whether  steam  or  electric 
lines,  they  are  entitled  to  a  fair  profit  on  their  investment,  pro- 
vided they  treat  the  public  fairly. 

At  the  present  time  the  people  of  this  country  are  demand- 
ing better  service  and  better  everything  than  in  years  gone  by. 
We  want  to  ride  in  luxurious  cars,  the  track  and  roadbed  must 
be  first  class,  so  that  we  can  be  transported  from  Chicago  to 
New  York  in  the  fewest  hours  possible.  What  does  this  condi- 
tion of  affairs  mean  to  a  railroad?  I  say  to  you,  it  means  a  very 
large  amount  of  money  expended  to  accomplish  all  this.  Has 
this  not  been  accomplished  by  the  leading  roads  of  this  country? 
I  think  you  will  agree  with  me  that  it  has. 

Admitting  this  condition,  should  we  not  be  reasonable  and  be 
willing  to  give  fair  returns  for  what  is  demanded?  The  Ameri- 
can people  are  exacting,  they  want  the  best  and  they  are  en- 
titled to  it;  but  let  us  at  all  times  be  reasonable  and  appreciate 
and  give  credit  where  it  belongs.  How  true  the  statement,  "easy 
to  find  fault  but  difficult  to  praise."  I  have  always  advocated  in 
my  own  city  so  far  as  street  car  service  was  concerned  (and  we 
have  had  some  ten  years  of  agitation  on  this  subject)  that  a  low 
fare  was  not  of  so  much  importance  as  to  have  first-class  service, 
and  I  am  a  believer  in  the  saying  that  you  cannot  get  something 
for  nothing.  A  dollar  should  always  be  worth  one  hundred 
cents,  and  when  we  all  come  down  to  this  way  of  thinking,  I 
doubt  very  much  if  we  would  be  inclined  to  find  fault  with  many 
things  that  at  the  present  time  we  are  disposed  to  criticise  some- 
what unfavorably.  I  am  optimistic  in  my  nature — I  want  to  see 
everybody  successful.  I  want  to  see  capital  and  labor  go  hand 
in  hand.  I  want  to  see  the  man,  or  those  that  put  their  capital 
together,  succeed  and  make  money,  if  they  transact  their  busi- 

382 


ncss  on  honorable  and  just  lines.  I  want  to  see  labor  get  its 
just  reward.  J  am  pleased  that  the  hours  of  the  laboring  man 
are  reduced  from  what  they  were.  Give  him  a  little  time  for 
rest  and  recreation.  He'll  be  all  the  better  for  it.  His  family 
will  not  suffer  from  such  a  condition.  In  conclusion,  let  us  be 
just  to  each  other,  follow  the  Golden  Rule — "Do  unto  others 
as  you  would  have  them  do  unto  you."  Be  liberal  and  charitable 
and  in  the  end  we  will  be  well  repaid  for  the  conditions  that  are 
sure  to  follow. 

THE  CHAIRMAN:  Mr.  Theodore  Marburg,  Chairman  of 
the  Finance  Committee,  desires  to  make  a  short  statement. 

MR.  THEODORE  MARBURG:  I  have  a  painful  duty  to 
perform,  gentlemen.  I  come  before  you  as  a  beggar.  This 
conference  has  been  subject  to  certain  expenses.  The  rental  of 
this  hall  for  four  days  involves  an  outlay  of  some  $900.  If  these 
proceedings  are  to  be  printed — and  it  is  hoped  they  will  bt ;  that 
method  has  been  followed  heretofore  by  this  great  association 
with  great  advantage — that  will  involve  an  outlay  of  $1,500. 
The  preliminary  expenses  have  been  $500,  and  stenographers' 
expenses  will  be  considerable.  So  that  we  have  got  to  appeal  to 
you  for  a  subscription  of  $3,500.  Now  we  don't  want  to  get  this 
from  one  big  corporation.  It  goes  without  saying  they  are  fall- 
ing over  each  other  to  pay  it  all,  but  we  would  rather  it  would 
come  in  small  amounts  from  men  who  feel  that  this  subject 
we  are  discussng  is  of  sufficiently  large  public  interest  to  call 
for  private  support.  Mr.  Lounsbury,  at  the  secretary's  desk 
at  the  rear  of  the  hall,  will  receive  subscriptions. 

THE  CHAIRMAN :  The  next  speaker  will  be  the  attorney 
of  the  American  Federation  of  Labor,  Mr.  Thomas  C.  Spelling, 
who  will  speak  on  "The  Trust  Question  from  the  Labor  Stand- 
point." 

Mr.  Thomas  Carl  Spelling. 

On  what  is  known  as  the  trust  question,  this  is  an  era  of  profuse 
declamation,  with  scarcely  any  sober  thought,  and  of  dazzling 
illumination  with  little  or  no  steady  light.  This  is  only  in  part 
due  to  the  intricacy  and  novelty  of  the  question.  Popular  delu- 
sions and  perplexities  are  due  largely  to  the  fact  that  many  pub- 

383 


licly  uttered  views  are  adulterated  with  self-interest  or  colored  by 
partisan  bias. 

Labor  has  no  peculiar  or  class  interest  in  the  subject.  What- 
ever the  benefits  of  capitalistic  combination,  they  are  enjoyed  by 
wage-earners  in  common  with  others,  and  whatever  its  extortions 
and  other  evils,  they  are  inflicted  upon  labor  and  upon  the  general 
public  in  equal  measures,  except  that  some  are  able  to  shift  the 
burden  successively  until  it  finally  rests  upon  those  primarily  en- 
gaged in  production. 

LABOR  HAS  NO  SPECIAL  INTEREST  IN  TRUST  QUESTION. 

Organized  labor  asks  no  special  privileges  or  exemptions.  To 
the  charge  which  has  been  recklessly  made  from  this  platform 
that  organized  labor  is  a  "trust"  or  is  seeking  to  establish  a  "labor 
trust"  little  need  be  said  for  the  consideration  of  those  possessing 
the  power  to  discriminate  even  in  a  moderate  degree.  Labor  is 
neither  an  article  of  interstate  commerce  nor  an  article  of  com- 
merce in  any  respect.  Labor  contracts  are  essentially  of  a  per- 
sonal and  local  character.  Their  subject  matter  does  not  require 
resort  to  a  Federal  court,  and  they  are  governed  by  the  law  of  the 
place.  And  for  this  reason  there  can  no  more  be  a  monopoly 
created  in  labor  contracts  than  there  could  be  in  marriage  con- 
tracts. And  for  the  same  reason,  any  attempt  to  hamper  labor 
organizations  or  restrict  their  operations  by  State  legislation 
would  prove  abortive.  But  I  cannot  refrain  from  remarking,  be- 
fore I  pass  from  this  topic,  that  what  would  be  vain  and  repre- 
hensible if  sought  to  be  done  by  statute  has  been  done  without 
hesitation  by  some  of  the  courts  through  abuse  of  the  power  to 
issue  writs  of  injunction.  And  if  politicians  and  political  parties 
desire  to  really  interest  organized  labor  in  the  next  Presidential 
campaign  let  them  make  an  issue  upon  the  provisions  of  the 
Pearre  Anti-Injunction  bill. 

If  organized  labor  saw  fit  to  specialize  in  condemnation  of  con> 
bination  in  restraint  of  trade  or  to  suggest  remedies,  it  could  not 
be  estopped  by  any  interest  or  policy  of  its  own.  When,  how- 
ever, the  question  is  asked  why  it  does  not  propose  remedies  for 
the  wrongs  of  monopoly,  the  answer  is  found  in  its  general  policy. 
The  organization  concerns  itself  with  those  matters  which  pe- 
culiarly affect  the  interests  of  its  membership.  In  this  respect  it 
does  not  differ  from  other  voluntary  associations,  such,  for  in- 
stance, as  the  manufacturers'  associations,  chambers  of  commerce 
and  stock  exchanges.  ' 

384 


The  trust  question  is  political  in  a  very  important  sense,  and 
the  labor  organization,  not  being  political,  maintains  a  merely  re- 
ceptive and  deliberative  attitude  toward  this,  as  it  does  toward 
all  policies  and  remedies  proposed  by  political  parties. 

Having  thus  defined  its  attitude,  I  deem  it  fit  and  proper  to 
assert  that  I  am  not,  and  cannot  be,  deceived  by  statements  as  to 
past  performances  of  either  of  the  two  parties  which  have  alter- 
nately been  in  power  for  thirty  years  or  more,  nor  by  the  sub- 
terfuges of  special  representatives  of  corporations,  nor  by  the 
insincere  promises  of  politicians  and  the  makeshifts  and  inef- 
fective remedies  proposed  by  them. 

Until  some  really  effective  solution  of  the  "trust"  problem 
is  proposed  in  good  faith  attempts  to  enlist  labor's  active  inter- 
est in  the  subject  will  fail.  In  common  with  others  of  the  plain 
people,  wage  earners  rest  in  confidence  that  in  due  time  a  fair 
measure  of  relief  will  be  proposed  by  proper  authority. 

COMMON  LAW  PRINCIPLES  UPON  RESTRAINT  OF  TRADE. 

There  is  no  common  law  principle  inimical  to  mere  monopoly. 
But  there  are  common  law  limitations  upon  the  power  to  con- 
tract. The  importance  of  this  distinction  in  any  impartial  con- 
sideration of  the  subject  can  scarcely  be  overestimated.  The 
limitation  upon  the  power  to  contract  was  first  recognized  and 
enforced  for  the  protection  of  artisans,  for  their  benefit,  as 
well  as  for  reasons  of  public  policy.  An  artisan  might  contract 
away  his  right  to  pursue  his  calling  in  a  given  town,  but  could 
not  make  a  valid  contract  not  to  pursue  it  at  all  anywhere  in 
the  kingdom.  The  limitation  upon  the  broader  contract  was 
imposed  because,  first,  it  deprived  the  artisan  of  the  means  of 
earning  a  livelihood,  and,  secondly,  it  might  not  only  deprive 
the  community  of  his  services  but  result  in  his  and  those  de- 
pendent on  him  becoming  a  public  charge.  That  principle  is 
part  of  the  common  law  but  not  of  Federal  cognizance,  because 
the  common  law  is  no  part  of  Federal  jurisprudence.  But  there 
was  then  no  court  rule,  statute  or  legal  principle  forbidding  any 
one,  whether  a  natural  person  or  a  corporation,  buying  up  or 
otherwise  becoming  owner  of  all  the  resources  of  a  particular 
kind  in  a  section  or  in  the  nation  and  thereby  monopolizing 
the  supply.  Nor  is  there  to-day  any  Federal  or  State  law  in  "ex- 
istence, nor  any  common  law  principle,  recognized  in  this  coun- 
try or  elsewhere  to  prevent  it. 

385 


But  while  this  is.  true,  yet  an  application  of  common  law  prin- 
ciples alone  has  been  found  sufficient  to  destroy  the  combina- 
tions resting  upon  mutual  agreements,  called  "trusts/'  without 
resort  to  statutory  law,  Federal  or  State ;  and  this  is  true  of  those 
dissolved  by  the  courts  since,  as  well  as  before,  the  enactment  oi 
the  Sherman  Anti-Trust  law.  I  do  not  overlook  the  fact  that 
in  the  Trans-Missouri  Freight  case  the  Supreme  Court  con- 
strued that  act  to  prohibit  restrictive  agreements  between  rail- 
roads engaged  in  interstate  commerce,  even  though  the  restric- 
tions might  be  deemed  only  reasonable.  But  this  is  all  the 
Sherman  act  amounts  to.  It  is  merely  a  cvrystallization  in  Fed- 
eral legislation  of  a  common  law  principle,  with  that  extension ; 
and  that  extension  has  been  lopped  off  by  recent  legislation,  as 
I  will  presently  show. 

SHERMAN  ACT  IMPOTENT  TO  CHECK  MONOPOLY. 

But  one  of  the  earliest  decisions  under  the  act  showed  it  to  be 
inapplicable  to  any  of  that  class  of  great  monopolies  of  which 
the  public  complains  and  against  which  public  complaint  has 
been  directed  for  a  period  reaching  back  to  a  date  long  prior 
to  its  passage.  I  refer  to  the  case  against  the  American  Sugar 
Refineries  Co.,  known  as  the  Knight  case,  decided  in  1897.  It 
was  there  decided  that  although  the  Sugar  Company  owned  or 
controlled  97  per  cent  of  the  sugar  products  of  the  country, 
yet  that  alone  was  no  ground  for  interference  by  the  Court.  In 
other  words,  there  is  no  law  by  which  to  reach  any  individual 
or  corporation  guilty  of  nothing  more  than  acquiring  and  main- 
taining a  monopoly,  no  matter  how  complete  or  oppressive; 
that  something  more  is  necessary;  that  there  must  be  a  restric- 
tive contract  between  two  or  more.  Not  only  so,  but  the  re- 
strictive agreement  must  refer  to  or  immediately  affect  inter- 
state commerce.  To  this  last  requisite  I  invite  your  special 
attention,  because  it  has  an  important  bearing  bearing  upon  the 
question  of  remedial  legislation.  The  first  construction  of  the 
term  "interstate  commerce,"  as  used  in  the  Constitution,  is 
found  in  the  early  case  of  Ogden  vs.  Gibbons,  and  has  never 
been  deviated  from  in  any  particular.  It  has  a  meaning  distinct 
from  the  existence  of  persons  or  entities  that  may  engage  in 
interstate  commerce;  also  distinct  from  the  things  constituting 
or  forming  the  subject  of  interstate  commerce.  Interstate  com- 
merce is,  in  proper  legal  sense,  an  ideal  thing.    When  an  indi- 

386 


vidual  transmits  an  article  of  smallest  value  across  a  State  line, 
he  creates  this  ideal  thing.  He  may  not  do  this  oftener  than 
once  a  year.  A  vast  corporation  may  ship  millions  of  dollars 
worth  of  value  from  State  to  State  each  day.  But  so  far  the 
Anti-Trust  Act  no  more  concerns  the  one  than  the  other.  The 
individual  may,  during  the  same  period,  be  engaged  in  a  competi- 
tive struggle  in  some  small  line  of  business,  and  the  corpora- 
tion may  possess  an  undisputed  monopoly  in  the  production  and 
sale  of  articles  of  prime  necessity  to  most  or  all  the  people,  and 
most  or  all  its  shipments  may  have  to  cross  State  lines  to  reach 
their  destination ;  and  yet  no  point  has  thus  far  been  reached  at 
which  the  Anti-Trust  Act  interposes.  An  agreement  between 
two  or  more  destructive  of  competition  must  be  shown. 

It  may  be  well  at  this  point  to  advise  you  that  the  purpose 
of  this  discourse  is  to  demonstrate  the  utter  worthlessness  of 
the  Sherman  Anti-Trust  Act  as  a  remedy  for  the  evils  of  mo- 
nopoly. 

Mr.  Dawes,  who  addressed  the  conference  yesterday,  professes 
great  fears  for  the  honest  business  man  from  the  enforcement 
of  the  Sherman  law.  He  gave  two  supposable  cases  for  illus- 
tration. One  of  them  was  that  of  an  agreement  to  sell  perish- 
able goods  at  a  lower  price  in  one  place  than  in  others.  The 
other  was  of  an  agreement  not  to  sell  below  cost.  I  call  your 
attention  to  the  fact  that  neither  of  these  agreements  is  within 
the  spirit  and  I  doubt  if  they  are  within  the  letter  of  the  statute. 
Such  agreements  tend  to  promote,  rather  than  to  restrict  trade. 
No  really  honest  transaction  is  in  any  danger  from  the  enforc- 
ment  of  the  law. 

There  is  not  a  phase  of  this  question  which  was  not  fully  dis- 
cussed in  the  arguments  and  expounded  by  the  court  in  the 
Knight  case;  and  from  the  date  of  that  decision  to  the  present 
neither  members  of  Congress,  nor  Senators,  nor  lawyers,  nor 
politicians,  nor  Presidents,  nor  candidates  for  the  Presidency, 
have  had  any  excuse  for  the  evasions  and  concealments  prac- 
ticed by  them  on  the  public.  The  full  power  of  Congress  over 
the  subject  is  embodied  in  the  Sherman  Act  and  that  Act  con- 
tains practically  no  force  or  value  as  affording  relief. 

MONOPOLY    WHICH    DOES    NOT    AFFECT    INTERSTATE    COM- 
MERCE NOT  REACHED  BY  LAW. 

It  was  recently  said  by  an  eminent  authority  that  the  courts 
have  never  construed  the  provision  of  the  Act  which  makes  it  a 

387 


misdemeanor  to  monopolize  or  attempt  to  monopolize  inter- 
state commerce.  Now,  if  the  gentleman  who  made  that  state- 
ment had  carefully  examined  the  Knight  and  the  Kansas  City- 
Stock  Yard  cases,  he  would  have  seen  that  the  defendants  were 
accused  in  both  cases  of  both  forms  of  offence  described  in  the 
Act,  that  is  to  say,  of  forming  a  combination  by  agreement  re- 
strictive of  interstate  commerce,  and  of  monopolizing  inter- 
state commerce.  And  the  Court  in  both  cases  declared  that  so 
long  as  the  way  was  open  for  competition  there  could  be  no  case 
made  out  under  the  monopoly  clause  and  that  so  long  as  there 
was  no  combination  between  two  or  more  persons  or  corpora- 
tions the  means  of  acquiring  a  monopoly  was  immaterial,  nor 
could  the  practices  or  methods  of  doing  business  be  considered. 

This  view  accords  with  both  the  language  and  the  logic  ol 
other  decisions. 

Thus  the  inexorable  logic  of  the  decisions  warrants  the  con- 
clusion that  one  of  these  great  industrial  organizations  could 
not  be  judically  reached  under  the  act,  even  though  it  had  a 
complete  monopoly  of  its  products.  This  is  due  to  the  restrict- 
ed meaning  attached  to  the  term  "interstate  commerce"  before 
alluded  to. 

To  make  myself  fully  understood  I  will  state  the  proposition 
in  another  form.  As  before  stated,  there  is  no  Federal  law  in- 
imical to,  or  which  could  be  constitutionally  applied  to  monop- 
oly, unless  such  monopoly  immediately  involved  interstate  com- 
merce. Now  let  us  suppose  that  five  men,  each  in  a  separate 
State,  own  all  the  pine  timber  of  merchantable  quality  in  the 
country.  One  of  them  may  most  assuredly  buy  out  the  others, 
or  they  may  form  a  corporation  in  one  of  the  States  and  all  sell 
to  it,  taking  stock  for  their  respective  interests.  In  either  case, 
there  is  created  a  monopoly.  The  Sherman  Act  does  not  reach 
it,  nor  would  any  amount  of  oppression  and  evil  practice  on  the 
part  of  the  monopolists  render  them  amenable  to  that  law.  Nor 
would  Congress  have  constitutional  power  to  deal  with  them 
though  each  took  stock  whose  par  value  was  worth  ten  times 
the  market  value  of  the  property  conveyed.  I  say  this  in  pass- 
ing for  the  benefit  of  those  who  are  demanding  Federal  laws  to 
prevent  stock  watering  or  over-capitalization. 

The  meaning  of  the  term  "interstate  commerce"  by  the  courts 
is  so  reasonable  and  so  obviously  conforms  to  the  intentions  of 
the  framers  of  the  Constitution,  that  any  hope  that  there  will 
ever  be  a  more  comprehensive  construction  is  utterly  vain ;  and 

388 


therefore  vain  is  the  hope  of  relief  at  the  hands  of  Congress 
from  industrial  monopoly  in  the  absence  of  an  amendment  of 
the  Federal  Constitution.  So  long  as  the  States  may  create 
corporations  and  confer  upon  them  unlimited  powers,  including 
the  power  to  hold  stocks  of  other  corporations,  the  Federal  Gov- 
ernment is  powerless  to  afford  a  remedy.  And  although  schemes 
of  Federal  legislation  in  various  forms  have  been  suggested 
from  time  to  time,  the  most  that  any  of  them  promises  is  to 
place  limitations  upon  the  operations  of  monopoly.  Not  one  of 
them  would  be  effective  to  divest  a  single  monopoly  of  its  in- 
herent monopolistic  power.  And  in  the  nature  of  things,  gov- 
ernmental supervision  and  constant  interference  with  the  busi- 
ness operations  of  institutions  transacting  a  large  percentage 
of  the  country's  business  is  impracticable.  But  even  if  it  were 
practicable,  vast  evils  would  flow  from  such  constant  interfer- 
ence, and  be  inflicted  upon  the  public. 

ANTI-TRUST  ACT  APPLICABLE  CHIEFLY  TO  TRANSPORTATION. 

The  only  kind  of  business  to  which  the  anti-trust  act  was 
found  to  be  clearly  applicable  was  interstate  transportation. 

I  will  not  attempt  a  reference  to  the  results  of  the  enforce- 
ment of  the  act  against  carriers  engaged  in  interstate  transpor- 
tation, but  will  call  attention  to  the  fact,  referred  to  a  moment 
ago,  that  the  act  has  been  practically  nullified  in  its  applicability 
to  interstate  railroads  by  the  rulings  of  the  Interstate  Commerce 
Commission  under  the  Hepburn  Rate  Act  construing  its  pro- 
visions. The  China  and  Japan  Trading  Company  complained  to 
the  commission  against  a  rate  of  85  cents  per  hundred  on  cotton 
goods,  agreed  upon  between  the  railroads  from  New  England 
points  to  the  Pacific  Coast,  while  the  rate  from  Southern  points 
to  the  Pacific  Coast  was  $1.25.  The  commissioners,  on  the  first 
day  of  last  July,  upheld  the  85-cent  rate,  and  held  that  in  doing 
so  they  were,  in  effect,  establishing  and  fixing  that  as  the  legal 
rate.  But  they  went  further,  and  held  that  the  fact  that  the 
making  of  the  85-cent  rate  was  the  result  of  a  combination 
among  the  railroads  was  of  no  importance ;  that  the  commis- 
sion having  examined  it  and  found  it  to  be  reasonable,  its  ruling 
was  equivalent  to  an  act  of  Congress  of  later  date  than  the 
anti-trust  act,  and  hence  superseded  it.  An  amendment  of  the 
anti-trust  act  to  permit  of  pooling  arrangements  between  inter- 
state railroads,  as  proposed  by  the  President,  appears  to  be  un- 
necessary.   The  same  result  seems  to  have  been  reached  by  the 

389 


enactment  of  the  rate  law  and  operations  of  the  commission  un- 
der it.  And  thus  we  see  that  the  little  that  remained  of  the 
Sherman  Act,  all  of  it  that  was  in  any  respect  effective  and  vital, 
has  been  repealed,  or,  rather,  superseded,  by  this  subsequent 
legislation.  And  it  is  probably  true,  as  has  been  charged,  that, 
for  this  and  other  reasons,  the  railroads  did  not  really  oppose, 
but  actively  favored,  the  Hepburn  Act. 

NATION  LACKS  POWER  TO  EFFECTIVELY  CONTROL  CORPORA- 
TIONS. 

In  these  remarks  I  have  directed  my  effort  to  showing,  and 
believe  I  have  shown,  that  as  respects  what  are  known  as  in- 
dustrial trusts  their  legal  status  is,  insofar  as  Federal  legisla- 
tion has  affected  them,  invulnerable  and  unassailable,  and  that 
as  to  interstate  carriers,  the  effect  of  recent  legislation  has  been 
to  supersede  and  nullify  all  prior  legislation  on  the  subject.  And 
until  some  honest  and  effective  remedy  is  proposed  all  discus- 
sions on  the  subject  of  remedies  for  monopoly  should  be  ac- 
cepted by  the  people  as  mere  claptrap ;  as  efforts  of  politicians 
to  confuse  and  mislead  them  and  postpone  the  day  of  settlement. 

My  views  have  not  been  in  any  respect  chang-ed,  but  rather 
strengthened,  by  those  who  have  already  addressed  the  con- 
ference. Mr.  Ellis,  the  Attorney-General  of  Ohio,  proposes  that 
the  Federal  Government  shall,  in  some  way  which  he  omits  to 
explain,  take  away  the  power  of  State  corporations  to  hold 
stocks  in  other  corporations.  It  is  difficult,  or  rather  impos- 
sible, to  see,  under  what  constitutional  provision  Congress  de- 
rives anv  such  power;  certainly  not  under  the  interstate  com- 
merce clause.  When  a  sovereign  State  empowers  a  corpora- 
tion to  use  its  capital  or  property,  or  even  its  credit  to  buy 
stocks,  that  power  is  as  much  a  vested  right  as  the  power  given 
a  State  corporation  in  its  charter  to  borrow  money  and  give  its 
note,  and  Congress  could  no  more  interfere  with  the  exercise 
of  one  right  than  with  the  other.  His  proposition  does  not  pre- 
tend to  cover  the  two  or  three  hundred  existing  monopolies  as 
to  stocks  already  acquired  under  State  authority.  Each  issue 
has  involved  the  making  of  a  contract.  Surely  neither  Mr.  Ellis 
nor  any  other  sane  lawyer  would  contend  that  there  is  any 
power  anvwhere  to  invalidate  these  contracts,  or  to  deprive  even 
a  trust  of  the  full  benefit  of  their  due  observance. 

The  scheme  of  such  judicial  interpretation  as  will  enlarge  the 
powers  of  Congress  under  the  Constitution  is,  of  course,  idle 

390 


and  vain.  Even  if  such  a  process  were  desirable  or  could  be 
tolerated,  it  cannot  be  done  unless  the  Supreme  Court  be 
changed;  and  to  change  it  would  be  about  as  tedious  and  un- 
satisfactory a  process  as  changing  so  many  wooden  images  into 
images  made  of  stone. 

To  the  proposition  to  give  the  Federal  Government  more 
power  by  constitutional  amendment,  of  course  the  sticklers  for 
State  rights  object.  For  my  own  part,  1  know  of  nothing  so 
absurd  and  worthless  as  this  narrow,  ingrained  prejudice  based 
upon  the  threadbare  doctrine  of  State  rights,  a  doctrine  of  no 
benefit  to  any  individual  on  the  face  of  the  earth,  a  doctrine 
which  has  been  a  barrier  to  progress  since  the  foundation  of  the 
Republic. 

These  conflicting  views  produce  a  fatal  counter-balance,  and 
the  people  stand  divided  and  helpless  while  gradually  they  are 
impoverished  and  economically  enslaved. 

It  is  also  proposed  that  Congressional  sanction  be  given  to 
combinations  among  the  railroads  by  amending  the  Sherman 
Act.  I  have  already  shown  that  this  was  indirectly  accomplished 
by  the  Hepburn  Rate  Act.  I,  for  one,  desire  to  enter  a  protest 
against  this  proposed  amendment  of  the  Sherman  Act  in  the 
interest  of  monopoly.  The  railroads  are  already  in  unlawful 
combination  against  the  people.  Travel  east,  west,  north  and 
south,  and  you  will  find  the  rates  non-competitive  and  exorbi- 
tant. Let  me  remind  you  of  the  fact  that  since  the  Hepburn 
law  was  passed  there  has  been  poorer  service,  more  fatal  ac- 
cidents, slacker  enforcement  of  safety  appliance  laws,  an  all 
around  increase  in  freights  and  fares,  increased  earnings  and 
increased  dividends,  despite  the  fact  that  more  water  has  been 
added  to  the  stocks  on  which  they  were  paid.  The  Interstate 
Commerce  Commission  merely  sits  as  an  equalizing  board,  do 
ing  the  work  of  traffic  managers  for  the  railroads,  their  salaries 
paid  by  the  people,  equalizing  the  rates  always  upward,  never 
downward.  What  the  public  demands  is  better  service  and 
lower  rates.  To  legalize  combinations  will  be  a  step  backward, 
and  will  postpone  the  legitimate  demands  of  the  people  indefi- 
nitely. Very  naturally  Mr.  Mather,  who  addressed  you  last 
evening,  like  other  railroad  presidents,  prefers  national  to  State 
regulation. 

I  have  observed  one  feature  in  common  in  the  views  of  a 
majority  who  have  participated  in  this  discussion.  No  matter 
how  learnedly  or  to  what  thength  they  discuss  the  monopoly 

39i 


problem,  they  generally  agree  upon  the  one  point— either  that 
nothing  can  be  done,  or  that  very  little  ought  to  be  done. 

I  hope  that  the  next  conference  held  by  the  National  Civic 
Federation  will  be  called  to  consider  amendments  to  the  Fed- 
eral Constitution.  I,  for  one,  think  it  should  be  amended  in 
several  particulars.  Among  others,  so  as  to  give  Congress  more 
power  over  existing  and  future  corporations,  providing  for  the 
election  of  United  States  Senators  by  popular  vote,  and  better 
defining  and  limiting  the  jurisdiction  of  the  Federal  courts,  and 
I  hope  the  Federation  will  have  the  credit  of  calling  and  holding 
such  a  conference  at  an  early  date.  If  it  delays  it  the  credit  will 
belong  to  others,  because  it  cannot  be  long  delayed. 

THE  CHAIRMAN:  Gentlemen,  the  next  speaker,  repre- 
senting the  attitude  of  labor,  is  Mr.  Warren  S.  Stone,  Grand 
Chief  of  the  International  Brotherhood  of  Locomotive  En- 
gineers. 

Mr.  Warren  S.  Stone. 

Mr.  Chairman — I  did  not  learn  until  since  luncheon  that  I  was 
going  to  be  one  of  the  speakers.  Unfortunately  I  have  not  been 
able  to  attend  any  of  the  four  meetings.  I  have  not  heard  any  of 
the  speeches,  and  have  only  heard  the  one  speech  of  Mr.  Dawes 
last  night,  so  I  can  say  all  I  want  to  say  to  you  in  a  few  minutes. 
I  am  going  to  boil  it  down,  as  Finnegan  did,  when,  sending  in  a 
report  of  a  railroad  collision,  referring  to  one  of  the  trains,  he 
said:  "Off  again,  on  again,  gone  again,  Finnegan!"  I  ques- 
tion very  much  why  I  should  be  called  upon  to  speak  on  trusts, 
unless'  it  should  be  considered  that  we  are  a  labor  trust,  and,  of 
course,  we  would  deny  that  assertion  at  once.  But  in  travelling 
to  and  fro  over  this  great  country  of  ours — and  regardless  of 
what  may  be  said  to  the  contrary,  it  is  the  best  on  earth — you 
don't  have  to  go  very  far  nor  talk  to  a  great  many  people  until 
you  learn  that  the  whole  nation  is  thoroughly  aroused.  Men 
are  discussing  questions  to-day  which  have  never  been  consid- 
ered before,  and  it  is  out  of  this  individuality  of  our  people,  of 
the  many  different  opinions  of  our  people,  that  the  success  of 
this  country  is  due  to  a  large  extent.  If  you  listen  to  some  of 
the  so-called  labor  leaders  you  would  think  this  present  con- 
dition of  affairs  was  going  to  be  wiped  out. 

VALUE  OF  LABOR  ORGANIZATIONS. 

I  believe  that  labor  organizations  have  come  to  stay.  I  real- 
ize that  this  is  an  age  of  big  things  in  this  country  of  ours.    We 

392 


are  crowding  events  of  centuries  into  decades,  and  decades  into 
single  years.  I  believe  it  is  necessary  to  have  corporations.  I 
have  no  objection  whatever  to  trusts  rightly  managed ;  in  fact, 
it  would  have  been  impossible  to  develop  this  country  of  ours 
without  combinations  of  capital.  The  next  thing  is,  what  is  the 
proper  legislation  to  have?  I  could  give  you  my  idea  of  it  in 
a  very  few  words.  Not  long  ago  I  was  making  a  wage  scale 
with  a  certain  railroad  president  and  he  said:  "Mr.  Stone,  we 
can't  afford  to  pay  it."  I  said:  "I  don't  see  why  you  can't. 
You  paid  18  per  cent,  on  your  common  stock  last  year,  to  say 
nothing  about  your  preferred  stock."  "Yes,"  he  said,  "but  you 
must  remember  that  all  represents  real  value.  There  is  no 
water  in  it."  I  believe  the  great  question  is  that  we-  should 
have  not  so  much  more  law,  but  better  enforcement  of  the  law ; 
better  respect  for  the  law,  and  the  same  law  applied  to  all  sec- 
tions of  the  country  alike.  I  don't  believe  in  these  imaginary 
lines,  or  trying  to  array  class  against  class.  I  believe  in  one 
country,  under  one  flag,  for  all  people,  and  the  same  law  apply- 
ing. I  don't  even  want  to  go  down  South  and  try  to  fight  out 
the  race  problem.  I  believe  the  people  in  the  South  are  better 
able  to  settle  that  themselves.  But,  coming  back  to  the  trust 
question,  it  seems  to  me  what  we  want  is  supervision  of  over- 
capitalization. I  do  not  believe  in  buying  a  street  railroad  for 
$23,000  and  pouring  in  two  and  one-half  millions  of  water,  as 
was  done  recently.  It  is  not  so  much  the  water,  although  some 
trusts  and  corporations  are  so  waterlogged  they  will  not  float. 
It  is  not  water  so  much  as  it  is  dividends  on  the  watered  stock. 
Demands  for  dividends  on  watered  stock  are  the  curse  of  the 
laboring  man  of  this  country.  Put  a  fair  valuation  and  a  fair  profit 
on  the  real  value  of  any  of  your  big  corporations  or  trusts,  if 
you  please,  and  we  labor  men  will  be  satisfied  and  will  recognize 
that  capital  is  entitled  to  a  fair  share  of  remuneration.  But  when 
you  come  down  to  demanding  25,  30  or  40  per  cent,  because 
you  have  that  much  water — that  is  what  hurts  all  of  us,  be- 
cause we  work  for  a  living.  The  declaring  of  dividends  that 
have  not  been  earned  on  watered  stock  that  has  not  a  fair  value 
is  one  of  the  abuses  that  should  be  remedied.  This  is  something 
the  law  can  reach ;  I  don't  care  whether  you  call  it  the  anti-trust 
or  Sherman  law,  or  what  you  call  it.  I  don't  suppose  the  time 
will  ever  come  when  labor  and  capital  will  agree  on  what  is  a 
fair  division,  because  in  the  exchange  of  values  between  those 
who  have  something  to  sell  and  those  who  want  to  buy  there  is 

393 


always  a  difference,  but  I  do  believe  the  thing  can  be  regulated 
so  as  to  give  each  interest  fair  compensation  and  its  fair  share. 
I  believe  at  times  both  labor  and  capital  are  unfair  and  unjust 
in  their  demands,  but  I  do  believe,  if  we  meet  the  questions  and 
settle  them  in  a  fair  and  equitable  manner,  we  can  meet  the  com- 
plex questions  that  may  arise  to-morrow  and  settle  them,  if  we 
attempt  to  do  so.  I  believe  we  are  going  to  have  trusts  and 
corporations  regardless  of  everything.  It  is  necessary  to  have 
combinations  of  capital  to  do  these  big  things ;  but  the  only 
plan,  it  seems  to  me,  would  be  to  regulate  the  over-capitaliza- 
tion of  these  many  industries  and  stop  paying  or  declaring  un- 
earned dividends  on  something  that  has  never  been  earned.  And 
now  I  am  going  to  give  way,  because  there  are  other  speakers. 
This  is  my  idea  of  the  whole  trust  question,  boiled  down  in  a 
few  words. 

THE  CHAIRMAN :  The  next  speaker  is  the  Hon.  Avery 
C.  Moore,  of  Idaho. 

Hon.  Avery  C.   Moore. 

Mir.  Chairman — I  am  going  to  take  a  text  for  my  few  re- 
marks :  "Every  man,  no  matter  where  he  was  born  or  what 
creed  he  professes,  whether  he  is  an  employer  or  a  wage-earner, 
is  entitled  to  be  judged  on  his  worth  as  a  man.  In  return  he  is 
bound  in  honor  to  give  to  every  man  a  fair  deal,  for  no  man  de- 
serves more  and  no  man  should  receive  less."  These  words  are 
from  a  recent  public  address  of  a  prominent  member  of  the 
Brotherhood  of  Locomotive  Firemen,  Theodore  Roosevelt.  And 
in  passing,  I  would  add  I  belong  to  the  same  union.  It  has  been 
my  privilegefor  a  number  of  years  to  work  alongside  of  men  who 
toil  for  a  living.  During  the  years  some  of  you  who  have  been 
in  the  counting-room  or  the  school,  drinking  at  the  fountain 
of  classic  literature,  perhaps,  I  have  been  working  shoulder  to 
shoulder  with  the  men  who  bear  upon  their  backs  the  burdens  of 
the  world's  industry ;  mingling  not  with  the  men  of  wealth,  but 
those  who  create  it;   mingling  with  those  not  in   authority. 

THE  CHAIRMAN:  I  hope  I  will  not  be  considered  out  of 
order  to  ask  the  speaker  to  confine  himself  to  the  subject  of 
the  conference. 

MR.  MOORE:  Very  well  Mr.  Dawes,  the  former  Comp- 
troller of  the  Currency,  said  last  night— and  I  hope  that  that  is 
in  line  with  the  purpose  of  the  conference — that  the  Department 

394 


of  Justice  was  playing  to  the  galleries  in  prosecuting  violators 
of  law.  In  this  instance  the  galleries  are  the  American  people, 
and  they  are  very  generous  with  their  applause.  The  certain 
way  for  the  trusts  to  prevent  or  to  stop  the  applause  from  the 
galleries  would  be  for  the  trust  magnate  to  cease  furnishing  the 
Department  of  Justice  with  occasion  to  provoke  the  applause  of 
the  gallery.  If  there  is  one  danger  more  than  any  other  in  this 
land  of  ours  to-day,  it  is  the  disposition  to  ask  immunity  from 
laws  that  displease ;  and  yet,  it  must  be  obvious  that  to  encour- 
age disrespect  for  some  law  very  speedily  will  encourage  disre- 
spect for  all  law.  The  trouble  with  Mr.  Dawes  and  those  for 
whom  he  found  it  expedient  to  speak,  is  not  that  we  are  passing 
special  laws  against  the  rich,  but  that  we  are  no  longer  employ- 
ing that  process  in  our  governmental  affairs  which  grants  spe- 
cial immunity  to  the  man  behind  the  dollar. 

Ours  is  a  Government  designed  to  establish  man  in  the  full- 
ness of  liberty.  There  are  institutions  in  this  land  to-day 
primarily  existing  to  defeat  the  large  welfare  of  the  American 
people  by  concentration  of  powers,  powers  in  the  hands  of  a 
few  men.  There  is  an  exhibition  of  that  power  a  little  to  the 
eastward  in  these  days.  It  had  its  inception,  however  much 
it  may  have  gotten  away  from  the  men  who  started  it,  in  the  de- 
sire to  challenge  the  American  people  and  call  a  halt  in  the 
attack  of  the  American  people  upon  predatory  wealth  and  the 
bringing  to  the  bar  of  justice  of  men  who  defy  the  people's  law. 
That  challenge  received  an  answer  from  the  American  public 
yesterday  morning,  under  Nashville  date  line,  and  Theodore 
Roosevelt  said  it.  There  is  no  desire  upon  the  part  of  the  peo- 
ple in  my  section  of  this  nation  of  yours,  to  hammer  the  man 
who  is  going  according  to  the  orderly  processes  of  law  in  the  ac- 
cumulation of  capital ;  but  we  do  demand  that  the  law-breaker, 
wherever  he  be,  in  the  palace  or  in  the  hovel,  shall  respect  the 
statute  law  of  this  Republic,  and  they  will,  and  we  are  powerful 
enough  to  see  that  they  do.  Shakespeare  said,  "It  is  excellent 
to  have  a  giant's  strength,  but  it  is  tenderness  to  use  it  like  a 
giant."  The  people  have  been  patient  under  the  abuse  of  power. 
This  power  is  the  essence  of  the  evil  in  the  trust  problem ;  but 
cowardice  does  not  belong  to  the  American  character,  and 
the  American  people  fear  no  problems,  present  or  impending. 
We  are  going  to  solve  them  in  the  spirit  of  justice,  according 
to  the  light  of  reason.  This  is  the  day  and  this  is  the  hour  of 
reason.     The  day  of  physical  conflict  is  over,  in  labor  disputes 

395 


and  all  other  realms  of  thought.  The  cause  that  cannot  defend 
itself  by  reason  has  not  any  ground  to  stand  upon.  I  bring  in 
conclusion  this  word:  That  the  people  of  the  section  where  I  live 
are,  as  your  people,  a  law-loving,  a  liberty-loving  people. 
They  are  not  afraid  either  of  the  power  of  money  or  of  alien 
foes.  Hand  in  hand  we  want  to  walk  down  the  pathway  of 
the  future  and  overcome  these  problems  as  they  arise ;  hand  in 
hand  we  are  going  to  do  that.  We  ask  you  to  accept  no  threat 
from  predatory  wealth ;  no  coercion  in  your  walk  of  life,  but  to 
say  that  the  mandates  of  the  people  must  be  supreme ;  and  we  are 
ready  to  back  up  the  law-makers  of  this  land  and  the  Depart- 
ment of  Justice  in  this  country  and  the  President  of  the  United 
States,  whether  it  be  Roosevelt,  a  Republican,  or  Bryan,  a  Dem- 
ocrat, when  he  takes  the  oath  of  office  of  President  of  the 
United  States.  We  are  going  to  hold  up  his  hands  and  say  that 
the  American  people  are  equal  to  every  problem  that  confronts 
them. 

THE  CHAIRMAN :  The  next  speaker  is  Mr.  H.  Jennings, 
of  Washington,  D.  C,  who  will  speak  to  us  about  the  ''English 
Incorporation  Act." 

Mr.  Hennen  Jennings. 

Mr.  Chairman — I  have  prepared  no  speech,  but  the  Hon.  Her- 
bert Knox  Smith,  in  his  remarks  before  the  convention,  touched 
briefly  upon  a  subject  which,  I  think,  should  receive  the  fullest 
consideration  at  the  hands  of  this  convention.  I  refer  to  the 
"Companies'  Acts"  of  Great  Britain.  By  reason  of  having 
worked  under  these  laws,  or  modifications  of  them,  as  an  en- 
gineer in  the  Transvaal  for  about  ten  years,  and  in  London  for 
about  six  years,  in  addition  to  an  experience  as  a  mining  en- 
gineer in  this  country,  I  feel  that  I  have  had  opportunities  to 
observe  the  practical  operation  of  such  legislation. 

The  willingness  of  the  American  engineers  to  receive  and 
utilize  information  from  any  and  all  sources  is,  I  believe,  one  of 
the  chief  causes  of  their  success.  I  see  no  reason  why  our  law- 
makers should  not  do  likewise,  especially  in  view  of  the  fact  that 
our  common  law  was  received  from  Great  Britain.  The  limited 
liability  laws  had  their  rise  in  England,  the  first  act  having  been 
passed  in  1862,  and  since  that  time  some  of  the  highest  legal 
talent  in  that  country  has  been  engaged  in  perfecting  the  laws 
relating  to  corporations.  This  has  resulted  in  revision  upon  re- 
vision and  much  new  legislation,  the  company  laws  having  been 
very  greatly  revised  in  1900. 

396 


The  basic  feature  of  these  laws  is  their  more  or  less  automatic 
enforcement.  Every  company  must  be  registered  and  must  fur- 
nish a  memorandum  of  association  and  a  prospectus,  the  pro- 
moters being  criminally  responsible  for  the  statements  appear- 
ing in  these  papers.  The  phraseology  and  form  of  the  articles 
of  association  are  largely  discretionary  with  the  promoters  and 
directors,  but  the  crown  laws  demand  that  certain  vital  facts  be 
shown,  such  as  the  full  intent  and  purposes  of  the  company,  the 
basis  upon  which  capita]  is  to  be  raised,  precise  particulars  of 
any  allotment  of  stock  for  other  than  a  cash  consideration,  the 
names  and  addresses  of  vendors  of  any  property  purchased  or 
acquired  by  the  company,  and  a  statement  of  all  commissions 
paid  for  subscriptions,  which  must  be  authorized  in  the  articles 
of  association  and  disclosed  in  the  prospectus.  A  part  payment 
of  the  capitalization  is  required  before  the  company  is  allowed 
to  begin  operations,  and  the  shares  are  subject  to  further  call 
up  to  their  face  value. 

Directors  are  elected  at  the  first  general  meeting  of  the  stock- 
holders, one-third  retiring  annually,  subject  to  re-election.  The 
directors  are  financially  liable  for  funds  improperly  applied  and 
for  dividends  paid  out  of  capital  not  earned,  and  are  also  liable 
to  two  years'  imprisonment  for  wilfully  making  a  statement  false 
in  any  material  part,  knowing  it  to  be  false.  The  stockholders 
annually  appoint  auditors  at  their  general  meetings,  who  are 
furnished  with  a  list  of  all  company  books,  to  which  they  have 
access  at  all  times.  These  men  are  usually  chartered  account- 
ants and  have  to  pass  examinations  as  to  competency. 

The  holders  of  one-tenth  of  the  issued  capital  of  the  company 
can  convene  an  extraordinary  meeting  by  giving  twenty-one 
days'  notice,  and  demand  information  of  the  officers  of  the  com- 
pany. The  list  of  stockholders  is  open  to  every  individual  mem- 
ber, and  copies  of  such  register  and  of  articles  of  association 
can  be  purchased  by  any  one  for  a  nominal  sum.  In  some 
articles  of  association  the  minority  holders  are  protected  by 
graded  voting  power  of  shares  in  favor  of  the  small  holders.  At 
the  general  and  extraordinary  meetings  reporters  are  allowed, 
and  thus  additional  publicity  is  secured. 

Although  there  have  been  few  criminal  prosecutions  under  the 
British  laws  and  much  perfunctory  examination  of  accounts, 
etc.,  the  fear  of  such  prosecution  has  kept  directors  far  more 
honest  in  dealing  with  the  affairs  of  the  company  than  would 

397 


the  fear  of  fines  and  losses  which  would  be  paid  by  the  company 
and  by  no  means  be  synonymous  with  individual  losses. 

I  heartily  sympathize  with  Mr.  Smith  in  his  confessed  bewil- 
derment if  he  has  endeavored  to  obtain  an  understanding  of 
some  of  the  complex  and  verbose  articles  of  association  and 
prospectuses  which  it  has  been  my  lot  to  examine.  In  most 
cases  these  documents  are  formed  to  cover  every  possible 
change  or  extension  of  the  business  of  the  company,  and  some- 
times unnecessary  words  are  used  for  the  purpose  of  confusing 
and  tiring  the  reader,  but  they  cannot  escape  the  requirement 
that  the  essential  facts  be  included. 

I  am  satisfied  the  British  laws  are  conducive  to  publicity^  in 
the  affairs  of  corporations  and  to  honest  administrations.  Their 
effectiveness  is  secured,  first,  by  universal  registration  under  one 
law,  and  without  registration  the  company  is  illegal;  second, 
publicity,  both  in  the  articles  of  association  and  prospectuses  and 
the  meetings  of  stockholders ;  third,  the  power  given  the  minor- 
ity stockholders  to  investigate  the  acts  of  the  majority;  fourth, 
the  criminal  as  well  as  financial  responsibility  of  the  promoters 
and  directors. 

I  by  no  means  recommend  servile  copying  of  the  British  sys- 
tem, but  would  plead  that  our  lawmakers  carefully  examine  it 
and  see  if  there  are  not  some  features  at  least  that  could  be 
adopted  to  advantage  in  this  country. 

THE-CHAIRMAN :  This  morning  I  stated  that  at  4  o'clock 
the  floor  would  take  possession  of  the  debate,  and  that  will  be 
carried  out  the  moment  the  clock  points  at  4.  In  the  mean- 
time, there  are  two  speakers  who  wll  make  addresses.  The 
first  is  a  man  who  ought  to  be  able  to  teach  us  a  great  deal 
on  this  subject — a  professor  of  the  University  of  Washington, 
a  man  who  was  commissioner,  representing  the  United  States 
in  five  international  expositions — Mr.  James  H.  Gore,  of  Wash- 
ington, D.  C,  whose  topic  is  "The  Relation  of  Industrial  Com- 
binations to  Export  Trade." 

Mr.  James  H.  Gore. 

Mr.  Chairman — The  manufacturer,  in  his  efforts  to  develop 
an  export  trade,  finds  problems  and  difficulties  that  did  not 
confront  him  when  he  sought  wider  markets  at  home.  The 
longer  time  that  intervenes  between  the  soliciting  of  an  order 
and   its    filling   has    unlimited   possibilities    for   fluctuations   in 

398 


prices  of  material,  wages  and  transportation,  and  the  delays  in 
settlement  lock  up  capital  that  might  be  utilized  several  times 
over  if  the  consumer  had  been  nearer  the  producer.  Laws  af- 
fecting import  duties  may  be  changed  in  the  interim,  contracts 
to  purchase  may  be  broken  with  the  annoying  difficulties  that 
meet  a  foreigner  in  attempting  to  secure  enforcement  by  legal 
processes,  and  strikes  that  could  not  be  anticipated  months  in 
advance  might  embarrass  the  manufacturer  or  cause  him  to  meet 
his  obligation  at  a  sacrifice. 

Still,  the  advantages  of  an  export  trade  to  the  producer,  to 
the  country  and  to  the  home  consumer  are  so  great  that  the 
dangers  and  difficulties  just  enumerated  should  be  valiantly  met 
by  the  manufacturer,  who,  in  return  for  the  benefits  he  bestows, 
ought  to  have  the  aid  of  his  government  and  the  encouragement 
of  his  fellow  citizens. 

ADVANTAGES  OF  FOREIGN  TRADE. 

The  good  features  of  foreign  trade  are  so  manifestly  axiomatic 
that  their  enumeration  carries  with  it  their  demonstration.  First 
and  foremost  is  the  widening  of  the  circle  of  exchange,  making 
the  money  involved  purchase  before  it  completes  its  cycle  a 
larger  variety  of  articles  to  meet  the  needs  of  a  greater  number 
of  persons ;  then  we  have  the  bringing  into  the  country,  in  re- 
turn for  the  goods  sold  abroad,  large  sums  that  pay  for  domestic 
materials  and  wages,  which,  in  their  ramifications,  benefit  count- 
less multitudes ;  and  finally,  there  is  the  greater  elasticity  of  pro- 
duction that  an  export  trade  makes  possible.  It  is  under  this 
last  category  that  we  find  some  of  the  unappreciated  benefits 
that  come  to  those  who  buy  from  world  purveyors. 

By  elasticity  is  meant  the  wider  range  made  possible  for  the 
productive  agencies,  so  that  the  domestic  demands  in  response 
to  unexpected  causes  would  not  likely  feel  restricted.  The  con- 
cern that  has  created  a  foreign  market  can  manufacture  up  to 
the  predicted  consumption  at  home  and  abroad,  and  in  the  event 
of  greater  demands  from  neighboring  consumers  there  is  the 
chance  of  meeting  them  by  allowing  a  part  of  the  foreign  busi- 
ness to  fall  into  the  hands  of  near-by  producers.  Better  still, 
such  a  concern  is  not  held  down  to  so  close  a  margin  above  an- 
ticipated orders,  knowing  that  the  surplus  can  find  sales  across 
the  seas.  Then,  too,  great  establishments  can  risk  production 
on  a  scale  that  means  maximum  efficiency,  confident  that  in  case 
of  tighter  markets  at  home  they  can  sell  their  output  abroad  at 

399 


prices  low  enough  to  catch  the  business  without  thereby  fixing 
rates  that  could  not  be  indefinitely  maintained.  From  this 
greater  efficiency  the  home  consumer  derives  a  permanent  ad- 
vantage, the  foreign  buyer  an  occasional  gain,  the  factory  avoids 
the  loss  incident  to  shutting  down  for  a  season,  and  laborers 
are  given  continuous  employment.  In  the  possible  disposition 
of  surplus  even  at  a  small  profit,  or  at  cost,  rather  than  its  con- 
signment to  the  almost  valueless  scrap,  we  have  risks  and  profits 
so  distributed  as  to  give  to  the  domestic  buyer  advantages  that 
he  could  not  enjoy  if  he  dealt  with  a  concern  having  a  more 
contracted  patronage. 

Of  course,  a  part  of  the  benefits  here  mentioned  are  not  ex- 
clusively inherent  in  establishments  blessed  with  an  export  trade 
— they  are  equally  present  in  concerns  whose  trade  is  wholly 
domestic.  But  it  must  be  recognized  as  true  that  the  industries 
which  have  assumed  proportions  great  enough  to  insure  the 
advantages  named  have  achieved  these  proportions  in  a  great 
measure  because  of  the  widening  circle  of  trade.  However,  a 
greater  agency  in  extending  these  advantages  is  the  possibility 
of  disposing  abroad  of  stock  that  becomes  surplus  because  of 
changes  in  style,  methods  of  operation,  or  results  sought  that 
made  themselves  felt  locally  before  they  could  affect  tastes  or 
wants  in  distant  lands.  This  might  be  conversely  true.  That 
is,  the  surplus  of  manufactures  made  for  foreign  consumption 
might,  after  the  demand  was  met,  be  just  the  thing  to  satisfy  a 
local  want.  To  illustrate:  Suppose  there  is  a  maker  of  har- 
vesting implements  whose  resources  of  manufacture  and  distribu- 
tion make  it  possible  for  him  to  send  his  machines  into  a  nar- 
row belt  along  which  wheat  ripens  and  must  be  cut  within  a 
fortnight.  His  output  must  be  limited,  and  with  even  the  max- 
imum permissible  ratio  of  surplus  to  predicted  demands,  there 
is  a  very  narrow  margin  for  extra  demands  made  by  a  heavier 
harvest,  and  if  this  extra  stock  is  consumed  the  added  profits 
are  insufficient  to  give  a  single  purchaser  an  appreciable  ad- 
vantage. In  contrast  to  this  condition,  let  us  think  of  a  maker 
whose  resources  make  it  possible  to  cover  the  district  from  Cen- 
tral America  to  Canada.  He  has  the  wants  of  six  weeks  or  more 
to  meet,  and  can  readily  pass  the  glut  of  southern  markets  to 
fill  the  demands  of  northern  farmers.  Extend  this  field  of  ac- 
tivity until  every  clime  is  included,  and  the  hungry  reaper  that 
finds  no  wheat  upon  the  equator  can  go  northward  or  south- 
ward, following  the  sun  as  it  ripens  the  wheat,  and  every  month 

400 


furnishes  needy  buyers.  The  improvements  suggested  by  the 
experience  in  the  earlier  harvest  are  placed  in  the  later  sales,  and 
the  end  of  this  late  season  is  so  near  the  beginning  of  a  new  sea- 
son in  another  zone  that  the  latter  profits  by  the  lessons  learned 
in  the  former.  And  so,  in  cyclic  measure,  the  leaves  of  the  book 
of  experience  are  turned,  and  each  is  its  predecessor's  debtor. 
Simply  change  the  article  to  be  marketed  and  modify  slightly 
the  causes  for  varying  demands,  and  a  fair  picture  will  be  pre- 
sented of  the  advantages  that  accrue  to  each  purchaser  when  the 
stall  from  which  he  buys  is  in  the  world's  market. 

For  many  years  the  energies  of  our  people  were  expended  in 
administering  to  the  wants  of  one  another,  and  our  rapidly 
growing  population  absorbed  the  output  of  shop  and  factory. 
Money  came  from  abroad  to  seek  investment,  and  in  staying 
here  it  became  the  purchasing  power  to  meet  wants  which  our 
prosperity  engendered.  High  standards  of  living  resulted  from 
the  ease  with  which  desires  were  gratified,  and  the  wages  paid 
made  it  possible  to  meet  the  standard  set.  But  it  was  not  pos- 
sible to  beget  wealth  by  trading  with  one  another,  and  the  in- 
terest due  abroad  for  investments  made  here  must  be  paid. 

GROWTH  OF  AMERICAN  FOREIGN  TRADE. 

It  is  not  possible,  nor  is  it  necessary  to  our  purpose,  if  pos- 
sible, to  point  with  definiteness  to  the  causes  that  brought  about 
a  realization  of  the  need  to  increase  our  foreign  trade,  but  a 
study  of  statistics  will  show  that  the  results  of  the  awakening 
came  within  the  decade  1890- 1900,  when  our  total  exports  of 
manufactured  articles  increased  from  $204,000,000  to  $606,000,- 
000,  or  per  capita  from  $32  to  $80,  while  our  imports  of  mer- 
chandise of  all  sorts  within  the  period  named  increased  by  only 
$60,000,000,  with  a  decrease  of  $1.47  per  capita  annually. 

It  was  in  this  decade  that  the  strong  plea  was  made  for  reci- 
procity— the  word  appearing  in  political  platforms  for  the  first 
time  in  the  enunciation  of  Republican  principles  by  the  conven- 
tion of  1892.  It  is  true,  the  reciprocal  arrangements  were 
thought  of  primarily  in  connection  with  our  intercourse  with 
the  countries  of  South  America,  but  the  benefits  of  such  trade 
relations  were  specifically  stated  as  tending  to  materially  in- 
crease our  sales  abroad.  In  this  platform  are  found  the  words : 
"We  point  to  the  success  of  the  Republican  policy  of  reciprocity, 
under  which  our  export  trade  has  vastly  increased  and  new  and 
enlarged  markets  have  been  opened  for  the  products  of  our 

401 


farms  and  workshops  *  *  *  and  claim  that,  executed  by  a 
Republican  administration,  our  present  laws  will  eventually  give 
us  control  of  the  trade  of  the  world." 

In  the  Democratic  convention  of  the  same  year  it  was  deemed 
wise  to  endorse  the  principle  of  reciprocity,  but  to  take  from 
the  opposing  party  any  credit  that  might  come  for  its  inception 
and  introduction. 

The  Republican  convention  of  1896  met  the  criticism  that 
reciprocity  juggled  with  the  people's  desire  for  enlarged  foreign 
markets  and  freer  exchanges  by  pretending  to  establish  closer 
trade  relations  for  a  country  whose  articles  of  export  are  al- 
most exclusively  agricultural  products  with  other  countries  that 
are  also  agricultural,  while  erecting  a  custom  house  barrier  of 
prohibitive  tariff  taxes  against  the  richest  countries  of  the  world 
that  stand  ready  to  take  our  entire  surplus  of  products,  and  to 
exchange  therefor  commodities  which  are  necessaries  and  com- 
forts of  life  among  our  own  people.  The  platform  adopted  de- 
clared that  "protection  and  reciprocity  are  twin  measures  of 
Republican  policy  and  go  hand  in  hand — protection  for  what  we 
produce,  free  admission  for  the  necessities  of  life  which  we  do 
not  produce,  reciprocity  agreements  of  mutual  interests  which 
gain  open  markets  for  us  in  return  for  our  open  markets  to 
others.  Protection  builds  up  domestic  industry  and  trade  and 
secures  our  own  market  for  ourselves ;  reciprocity  builds  up  for- 
eign trade  and  finds  an  outlet  for  our  surplus."  In  1904  the 
extension  of  our  export  trade  was  emphasized  as  the  end  sought, 
with  reciprocity  as  a  means  thereto. 

This  brief  extract  from  political  history  is  cited  simply  to 
show  that  conventions,  seeking  to  reflect  public  opinion  rather 
than  create  it,  saw  the  extension  that  should  be  given  to  our 
trade,  gave  their  endorsement  and  sought  to  claim  some  credit 
by  pointing  to  legislation  which  within  the  period  of  our  great 
commercial  activity  had  been  enacted. 

Economists  would  suggest  other  causes  for  the  rapid  develop- 
ment of  our  foreign  trade,  and  people  arguing  for  or  against 
industrial  combinations  will  point  to  this  extension  as  a  con- 
firmation of  their  contention. 

EXPORTS  OF  MANUFACTURED  PRODUCTS. 

Whatever  may  have  been  the  agency  that  called  this  trade 
into  existence,  diverse  as  may  have  been  the  instrumentalities 
that  have  promoted  it,  so  far  as  the  future  is  concerned,  they 

402 


are  valueless  unless  they  can  suggest  means  for  its  further 
growth,  or  at  least  check  influences  which  threaten  its  retarda- 
tion. 

While  there  has  been  some  fluctuations  in  our  total  exports, 
there  has  been  a  steady  growth,  with  an  increasing  ratio  of 
gain,  in  our  export  of  manufactures  from  $7,000,000  in  1820  to 
$686,000,000  in  1906.  Our  ability  to  sell  food  stuffs  depends  upon 
conditions  over  which  the  producer  has  no  control,  and  with 
the  growing  demands  at  home  the  surplus  available  foi  sale 
abroad  must  diminish  unless  more  intensive  farming  is  prac- 
tised. This  becomes  especially  apparent  when  we  find  that,  while 
our  population  between  1890  and  1900  increased  by  13,681,000, 
there  were  added  within  the  same  decade  only  1,816,000  to  the 
army  of  farm  laborers  of  all  classes.  During  the  past  year 
1,245,000  immigrants  came  to  our  shores,  who,  knowing  but 
little  of  our  agricultural  methods  and  landing  remote  from  our 
farming  districts,  have  become  consumers  of  food  rather  than 
producers.  In  1906  our  production  of  wheat  exceeded  our  con- 
sumption by  97,000,000  bushels,  while  in  1900  this  excess,  under 
crop  conditions  quite  similar,  was  186,000,000  bushels.  This 
great  difference  can  be  understood  when  we  find  that  the  per 
capita  consumption  between  the  dates  named  grew  from  4.74 
bushels  to  7.08  bushels.  In  the  case  of  corn  the  excess  of  pro- 
duction over  consumption  between  1900  and  1906  suffered  a  loss 
of  74,000,000  bushels.  To  correct  the  impression  that  larger 
quantities  of  grain  are  year  by  year  converted  into  meat  and 
sold  abroad  as  food  products,  only  a  glance  is  needed  at  the 
statistics  of  exports  of  all  forms  of  meat  and  dairy  products. 
They  show  that  in  1900  we  sold  abroad  products  of  this  sort 
to  the  value  of  $184,000,000,  while  our  sales  for  1906  amounted 
to  only  $169,000,000. 

This  analysis  must  clearly  show  that  our  commercial  pros- 
perity can  best  be  advanced  by  stimulating  our  manufactures, 
increasing  the  number  of  our  factory  hands  and  artisans,  and  feed- 
ing to  them  our  present  surplus  of  food  products.  In  this  way  we 
send  abroad  the  raw  materials  of  mine  and  forest,  worked  into 
shape  under  the  direction  of  "American  ingenuity  and  fashioned 
by  men  nourished  by  the  products  of  our  boundless  farms. 

Out  of  a  total  export  during  1906  of  $686,000,000  of  manufac- 
tured goods,  $608,000,000  came  from  establishments  the  major 
part  of  which  might  be  characterized  as  trusts  or  industrial  com- 
binations.    The  relation,  therefore,  between   concerns   of  this 

403 


sort  and  our  export  trade  is  worthy  of  most  careful  attention. 
A  very  important  feature  that  must  be  considered  is  the  question 
of  labor.  Taking  the  most  recent  data  available,  and  assuming 
that  concerns  which  engage  in  foreign  trade  employ  in  meeting 
that  trade  a  number  of  workmen  which  bears  to  the  total  num- 
ber employed  the  same  ratio  that  their  foreign  business  does  to 
their  total  output,  we  find  that  216,000  persons  are  engaged  in  pro- 
ducing articles  for  consumption  abroad.  If  each  wage  earner  sup- 
ports three  individuals — which  is  regarded  as  a  fair  estimate — 
three-quarters  of  a  million  people  in  this  country  are  directly 
dependent  for  a  living  upon  our  export  trade.  To  this  number 
should  be  added  7,890  officers  and  salaried  men,  whose  services 
are  similarly  engaged.  Each  of  these,  as  a  rule,  is  the  head  of  a 
household  supporting  that  number  of  homes,  with  their  greater 
wants  that  must  be  met. 

It  is  impossible  to  determine  with  any  degree  of  precision  the 
amount  of  capital  invested  in  the  concerns  manufacturing  for 
foreign  markets,  but  the  most  authentic  information  places  the 
aggregate  between  five  and  seven  billions  of  dollars.  The  most 
casual  consideration  of  these  stupendous  figures  suggests  that 
nothing  hasty  or  ill-advised  should  be  done  that  would  jeopar- 
dize a  trade  which  means  so  much  to  the  nation  as  a  bringer-in 
of  money  from  abroad,  which  supports  such  a  large  army  of 
workmen  who  are  consumers  of  our  farm  products,  which 
utilizes  in  the  most  profitable  manner  our  wealth  of  raw  ma- 
terials, and  upon  whose  profits  so  many  stockholders,  scattered 
over  the  land,  rely  for  dividends. 

This  seems  an  opportune  time  for  uttering  a  word  of  warn- 
ing to  stay  the  lynching  spirit  that  animates  legislatures  to  con- 
demn corporations  without  indictment,  and  suppress  them  by 
enactments  instead  of  trial ;  When  States'  Attorneys  levy  a 
species  of  blackmail  by  compromising  claims  for  $3,000,000  with 
$200;  when  juries  are  exercising  the  right  to  define  trusts,  mo- 
nopolies and  restraint  of  trade  and  fixing  the  fine  with  the 
exigency  of  the  public  treasury  in  mind. 

There  are  men  who  failed  to  see  opportunities,  or  let  them 
slip  without  seizing,  and  now,  looking  upon  others'  success,  be- 
wail their  failures  and  appeal  for  aid  under  the  guise  of  clamor- 
ing for  the  protection  of  their  fellows.  They  seek  to  stop  evo- 
lution by  revolution,  and  ask  Congress  to  stay  progress  by 
hasty  and  illy  advised  legislation. 

To  declare  a  corporation  a  trust  is  evidence  of  keen  acumen; 

404 


to  denounce  it  as  a  monopoly  shows  deep  concern  for  the  pro-, 
ductive  agencies  without  the  pale ;  and  to  file  an  indictment  for 
restraint  of  trade  is  proof  positive  of  an  unselfish  interest  in  the 
welfare  of  consumers.  In  the  legislature  of  nearly  every  State 
in  the  Union  there  are  men  who  fully  realize  the  value  in  pres- 
tige and  votes  of  legislation  aimed  against  the  few  who  are  suc- 
cessful, under  the  specious  plea  that  they  are  responsible  in 
some  mysterious  way  for  the  incompetency  of  others,  and  so, 
to  win  praise  for  watchfulness  and  fearlessness,  they  introduce 
measures  against  restraint  of  trade  which,  as  laws,  become  the 
efficient  means  for  restricting  commerce,  and,  acting  as  artificial 
checks,  force  the  foremost  in  the  industrial  race  to  wait  for  the 
hindmost  to  catch  up,  thus  enclosing  trade  within  narrow  walls. 

LARGE  CONCERNS  NEEDED   IN   WORLD'S   MARKET. 

When  the  world  is  the  market  the  business  must  be  on  equal 
magnitude.  Co-operation  of  many  men  and  the  aggregation 
of  their  many  small  capitals  are  necessary  to  erect  factories, 
to  organize  labor,  and  secure  the  best  results  by  opening  mar- 
kets for  the  exchange  of  manufactured  products  among  all  peo- 
ples. Still,  the  field  is  open  to  all  comers.  New  factories  may 
be  drawn  into  the  association,  but  no  monopoly  is  created, 
for  new  ones  spring  up  to  take  their  places.  Combinations 
controlling  millions  of  dollars,  with  the  world  for  a  market,  do 
not  have  a  tithe  of  the  influence  in  controlling  that  market  that 
the  formation  of  a  partnership  by  two  grocers  has  in  the  mar- 
ket of  a  country  town.  If  we  are  to  extend  our  foreign  trade, 
or  even  have  it  keep  pace  with  our  growing  purchases  from 
other  lands,  there  must  be  a  keener  appreciation  of  the  fact  that 
the  magnitude  of  industrial  associations  must  correspond  with 
the  magnitude  of  the  business  done;  that  business  cannot  be 
kept  within  the  artificial  boundaries  of  countries  and  States,  and 
that  it  is  sheer  madness  to  attempt  to  restrict  business  as  that 
of  a  local  manufactory  may  be  restricted. 

Past  experience  has  revealed  some  of  the  abuses  resulting 
from  aggregations  of  capital.  There  have  been  many  instances 
where  monopolies  exercised  mercilessly  powers  granted  to 
them.  They  were,  in  practically  all  cases,  monopolies  because 
of  exclusive  rights  granted  to  them  by  the  Government  and 
made  secure  by  force  when  necessary.  Without  such  a  grant 
or  a  basic  patent  under  the  Government's  seal  no  association 
of  men,  no  aggregation  of  capital  can  succeed  in  monopolizing 

40s 


trade  for  more  than  a  brief  period  of  time.  Thorold  Rogers,  in 
speaking  of  the  reasons  for  the  failure  of  the  Dutch  Indies  Com- 
pany, says:  "They  kept  up  prices,  and  so  limited  consumption. 
They  strained  every  nerve,  exhausted  their  credit  in  their  effort 
to  keep  by  main  force  other  traders  out  of  the  field,  experience 
proving  that  the  only  way  one  can  check  competition  is  by  low- 
ering prices.  In  the  expectation  of  getting  one  large  profit  on 
each  transaction  they  succeeded  in  making  a  small  profit,  or 
even  loss,  on  their  transactions  put  together,  for  it  costs  more 
to  protect  a  designedly  narrow  trade  than  it  would  to  establish 
and  render  permanent  an  intentionally  wide  one.  In  brief,  they 
narrowed  their  market,  and  so  narrowed  their  profit." 

Every  business  association  of  the  present  day,  formed  for 
any  other  purpose  than  to  avail  itself  of  the  economic  benefits 
of  association,  by  means  of  which  it  may  be  enabled  to  lower 
prices  and  to  extend  its  marker,  has  experienced,  or  will  ex- 
perience, the  truth  of  the  words  just  quoted. 

INCREASED  PRODUCTION  BENEFITS  CONSUMER. 

The  converse  of  this  general  proposition,  mentioned  once  be- 
force,  is  equally  true — the  increase  in  production  cheapens  the 
cost  to  the  consumer.  It  has  been  aptly  said:  "Wheat  is  raised 
in  Dakota,  milled  in  Minnesota,  carried  to  Boston,  and  baked 
in  the  larger  bakeries  at  a  total  cost  of  3  J/J  cents  per  pound. 
Yet  inferior  bread,  baked  in  the  small  shops,  is  sold  to  the  poor 
at  6  cents  per  pound.  The  cost  is  nearly  doubled  after  capital 
has  done  its  part.  The  cost  of  railway  service  does  not  amount 
to  one-half  cent  per  pound;  the  cost  of  retailing  is  five  times 
that.  The  railroads  carry  meat  from  Kansas  to  New  York  for 
one  cent  per  pound,  but  the  added  cost  to  the  consumer  after 
it  leaves  the  railroad  is  five  to  ten  times  the  railroad's  charge. 
The  country  is  convulsed  by  a  slight  rise  in  the  price  of  coal, 
but  the  poor  in  our  cities,  who  buy  coal  in  small  lots,  pay  100 
to  200  per  cent,  above  wholesale  prices."  The  economy  of  the 
future  will  be  largely  in  the  saving  of  waste  in  retailing,  which 
averages  20  per  cent,  of  the  price  the  consumer  pays.  Aggre- 
gated capital  may  be  used  to  advantage  in  this  direction. 

Small  capital,  business  done  on  credit  and  high  interest  make 
low  wages,  inferior  workmen  and  bad  work.  Just  in  propor- 
tion as  industry  is  rightly  organized,  the  necessary  capital  in- 
vested and  a  large  trade  sought  by  means  of  intelligence,  econ- 
omy and  small  profits,  will  this  condition  of  affairs  be  improved. 

406 


Instead  of  aggregated  capital  being  responsible  for  low  wages 
and  high  prices,  it  promises  the  only  remedy. 

Of  the  wealth  now  produced,  workingmen  receive  90  per 
cent.,  so  it  is  claimed,  and  of  the  10  per  cent,  saved  and  set 
aside  to  become  capital,  workingmen  save  and  own  one-half. 
It  is  the  remaining  5  per  cent,  in  the  hands  of  the  few  which 
makes  millionaires  and  causes  so  much  apparent  inequality.  The 
only  hope  for  a  better  future  is  in  the  creation  of  a  greater 
amount  of  wealth  by  means  of  the  improved  use  of  natural 
forces,  more  perfect  machinery,  more  effective  methods  of  man- 
ufacture and  distribution,  greater  utilization  of  the  present 
waste  of  time,  labor  and  material,  and  in  the  aggregation  of 
capital  necessary  for  their  utilization. 

Great  concentration  of  capital  resulting  from  combination  of 
the  capital  of  several  concerns  is  usually  called  a  trust.  This 
term  is  also  applied  to  a  consolidation,  combine,  pool  or  agree- 
ment of  two  or  more  concerns  mutually  competing,  which  es- 
tablishes a  limited  monopoly,  with  power  to  fix  prices  or  rates 
in  any  industry  or  group  of  industries.  If  its  purpose  is  to 
monopolize  an  industry,  fix  the  price  of  raw  materials,  restrict 
production  and  enhance  the  selling  price  of  the  product,  its 
existence  as  a  factor  in  our  hold  upon  foreign  trade  cannot — 
would  not — make  amends  for  its  pernicious  methods. 

TRUST  FORMS   ENABLE  US  TO   COMPETE   ABROAD. 

The  economies  that  are  necessary  in  order  to  meet  the 
cheaper  labor  abroad  compel  our  industries  to  find  locations 
that  are  most  favorably  situated  with  respect  to  raw  material, 
power,  facilities  for  distribution  and  many  other  elements  that 
figure  in  the  cost  of  production.  A  finished  product  may  con- 
sist of  parts  most  cheaply  made  in  different  localities  and  as- 
sembled in  another,  and  it  may  happen  that  the  various  parts 
were,  until  recently,  made  by  different  concerns.  Every  prin- 
ciple of  political  economy  and  factory  management  would  call 
for  a  consolidation  of  these  various  establishments  because  of 
the  community  of  interests  involved.  If  they  should  all.be  sit- 
uated within  a  single  State  it  would  be  a  simple  matter  to  com- 
bine in  a  joint  stock  company,  but  under  our  Federal  Govern- 
ment an  industrial  corporation  is  the  creature  of  the  State  in 
which  it  is  organized.  If  permitted  to  do  business  other  than 
commercial  in  another  State,  it  is  only  by  interstate  comity. 
and  may  be  excluded  under  the  provisions  of  a  State  law,  based 

407 


on  antipathy  to  combinations,  the  color  of  the  hair  of  its  presi- 
dent or  the  grade  of  cigars  he  smokes.  States  are  extremely 
jealous  of  foreign  corporations.  In  some  they  are  not  allowed 
to  hold  real  estate.  In  others  they  are  discriminated  against 
by  taxation,  the  effort  having  been  repeatedly  made — sometimes 
with  success — to  tax  foreign  corporations  doing  business  in  a 
State  upon  the  entire  capital.  This  demand  to  consolidate,  or 
to  locate  constituent  elements  of  production  in  other  States, 
with  local  stockholders  and  officers,  suggested  that  the  stock- 
holders surrender  their  stock  certificates  into  the  hands  of 
trustees,  and  take  from  them  certificates  showing  the  amount 
of  interest  thus  surrendered.  This  method,  first  adopted  about 
thirty  years  ago,  called  into  use  the  term  trust.  If  every  share 
of  stock  in  the  constituent  companies  represented  actual  value, 
and  if  all  shares  were  surrendered  in  return  for  certificates  call- 
ing for  the  exact  amount  surrendered,  the  vicious  attempts  to 
control,  with  comparatively  few  shares,  a  number  of  concerns 
by  holding  a  majority  of  shares  of  the  trust  would  not  have 
aroused  such  antagonism  as  to  induce  the  half-dozen  trusts 
that  came  into  existence  to  voluntarily  dissolve  and  be  con- 
verted into  large  corporations.  The  war  against  trusts  becomes 
a  war  against  corporations,  though  in  the  public  mind  the  for- 
mer term  will  survive. 

COMBINATIONS  SHOULD  BE  LEGALIZED. 

If  it  be  admitted  that  business  of  a  magnitude  to  overleap 
State  boundaries  and  be  commensurate  with  the  nation  is  to 
be  tolerated  in  the  United  States,  then  the  industrial  combina- 
tion must  also  be  tolerated,  or  the  law  must  legalize  some  de- 
vice to  take  its  place. 

When  the  rights  of  States  were  granted  to  us  in  our  Con- 
stitution there  was  no  dream  of  the  present  ramifications  of 
commerce.  Steam  and  electricity,  in  their  economic  utilization, 
must  regard  the  boundaries  of  States  as  artificial  as  those  which 
delimit  a  town  or  county.  New  Orleans  and  Seattle  are  as  near 
to  Chicago  as  were  Danville  and  Peoria  a  half-century  ago,  and 
Federal  license  would  be  just  as  appropriate  to-day  as  was  a 
city  charter  when  our  industries  were  in  their  beginnings. 

There  is  nothing  inherently  evil  in  trusts.  Like  all  other  busi- 
ness combinations,  whether  partnerships,  associations  or  cor- 
porations, they  are  evil  if  organized  and  conducted  for  evil  pur- 
poses, and  beneficial  if  organized  and  conducted  for  legitimate 

408 


ends.  Increased  concentration  of  capital  and  commercial  power 
finds  its  justification  and  warranty  for  existence  in  giving  to  the 
community  better  service,  either  in  superior  quality  or  inferior 
price  of  its  product.  Every  attempt  to  ignore  this  principle  has 
met  with  disaster,  and  each  effort  to  exploit  the  community 
through  higher  prices,  instead  of  exploiting  nature  through  im- 
proved methods  of  production,  administration  and  distribution, 
will  spell  ruin. 

It  is  the  community,  made  up  of  capitalist  and  laborer,  that 
creates  the  wide  demand,  furnishing  the  greater  consumption, 
which  is  the  market  that  makes  aggregation  of  capital  profit- 
able. A  disregard  of  the  obligations  to  the  community  in  the 
attempt  to  lessen,  because  of  the  greater  resources,  the  expense 
of  production,  and  at  the  same  time  put  up  the  price  of  the 
product  through  a  control  of  the  market,  is  responsible  for  the 
ill-repute  into  which  some  of  the  combinations  have  fallen  and 
the  suspicion  under  which  the  others  rest. 

EFFECTIVENESS  OF  PUBLICITY. 

There  is  at  hand  an  efficacious  means  for  putting  an  end  to 
this  economic  rapine.  It  needs  no  legislation  to  call  it  into  ex- 
istence, nor  new  machinery  to  make  it  effective.  It  lies  in  the 
extension  of  the  functions  of  our  very  excellent  Census  Bureau, 
coupled  with  the  Bureau  of  Statistics,  Bureau  of  Corporations 
and  Bureau  of  Manufactures,  by  which  the  American  people,  as 
consumers  and  potential  producers,  can  be  informed  as  to  the 
price  of  materials,  cost  of  production  and  selling  prices  de- 
manded. If  the  difference  between  costs  and  prices  assume  un- 
due proportions  in  the  minds  of  those  who  know,  two  results 
will  inevitably  follow — a  curtailing  of  consumption  and  the  in- 
ducing of  idle  capital  to  embark  upon  a  business  that  seems  so 
promising. 

Real,  active  competition  does  not  have  half  the  terror  that 
probable,  potential  competition  has.  Money  is  now  abundant, 
ordinary  securities  pay  low  rates,  and  capital,  tempted  by  our 
prosperity,  is  ready  for  industrial  ventures.  However  greedy 
a  concern  might  be,  self-preservation  would  be  motive  enough 
to  induce  it  to  keep  the  price,  by  the  introduction  of  every  pos- 
sible improvement  and  economy,  so  steadily  on  the  downward 
move  that  competitors  would  refrain  from  the  attempt  to  un- 
dermine. 

There  is  no  fallacy  so  widespread  and  so  provocative  of  nag- 

409 


ging  legislation  as  the  idea  that  industrial  combinations  seek 
through  monopolistic  control  to  fix  costs  and  prices  beneficial 
to  themselves  while  harmful  to  the  community.  No  one  knows 
better,  nor  appreciates  more  keenly,  than  do  the  managers  of 
great  industries  that  safety  rests  in  small  margins  and  profits 
must  come  from  large  sales. 

Paternalistic  legislation  is  hurtful  if  it  keeps  in  existence  com- 
petition that  is  expensive  because  inefficient;  it  is  reactionary  if 
it,  in  suppressing  large  corporations,  reverses  our  policy  of  in- 
dustrial freedom,  and,  in  demanding  individual  producers  in  lieu 
of  corporate  concerns,  throws  us  back  to  the  time  of  the  hand 
loom,  sickle  and  pushcart. 

Resolve  the  railroad  corporations  into  their  integral  concerns 
and  we  find  ourselves  in  the  midst  of  conditions  that  prevailed 
thirty  years  ago.  Prohibit  co-operative  industries  and  we  will 
see  the  farmer  journey  from  woodworker  to  blacksmith  shop 
and  then  to  the  painter  to  have  made  a  plow  which  he  can  now 
buy  with  the  time  these  journeys  would  cost.  Restrict  produc- 
tion to  single  lines,  and  we  would  find  in  scrapheaps  waste  ma- 
terials that  now  meet  the  cost  of  production. 

GROWTH  OF  TRADE  FAVORS  CONCENTRATION  OF  CAPITAL.6 

In  our  country's  youth  surplus  capital  was  not  available  for 
the  creation  of  great  enterprises,  and  foreign  money  was  slow 
to  come  so  far  for  investment  in  precarious  industries,  so  man 
associated  himself  with  man,  joined  his  small  means  to  those  of 
others,  and  in  co-operation  achieved  results  which,  in  older 
countries,  might  have  rewarded  individual  efforts.  Small  con- 
cerns thus  created  paid  the  penalty  of  their  success  in  seeing 
rivals  come  into  the  field,  who,  conscious  of  local  conditions 
only,  produced  when  demands  were  great  and  heartlessly  dis- 
charged their  workmen  when  markets  were  glutted.  In  the 
absence  of  widening  markets  profits  were  sought  in  cutting 
prices,  with  the  accompanying  result  of  failures  and  uncertain 
adjustments  of  supplies  to  demands.  Stability  required  larger 
organization,  and  so  small  concerns  merged  into  greater  estab- 
lishments, and  more  men  became  interested  in  their  manage- 
ment. They  were  democratic  organizations,  suited  to  our  dem- 
ocratic instincts.  In  the  natural  economic  development,  greater 
concentration  of  capital  was  needed  to  make  possible  a  more 
minute  differentiation  of  talent  and  a  higher  integration  of  in- 
dustrial energy,  until  now  we  have  a  precision  that  means  ac- 

410 


curate  relation  of  supply  to  demand ;  organized  employers  treat- 
ing with  organized  labor,  insuring  permanency  in  production, 
and  elaborated  means  of  distribution,  reaching  the  uttermost 
parts  of  the  earth  and  making  the  world  our  market. 

The  giant  who  is  only  a  bully  merits  our  contempt,  and  the 
great  corporation  that  abuses  its  opportunity  to  benefit  the 
community  deserves  our  condemnation.  Twenty  centuries  have 
placed  an  ever-strengthening  seal  of  approval  upon  the  injunc- 
tion, "By  their  fruits  ye  shall  know  them."  The  least  attractive 
blossom  may  give  way  to  the  most  luscious  fruit.  Fire  can 
burn  and  water  drown,  but  rightly  conjoined  they  form  the  liv- 
ing breath  of  the  world's  activities.  Dynamite  can  wreck  a 
home  and  kill  the  innocent,  but  it  can  likewise  loosen  the  sculp- 
tor's marble  or  break  down  the  miner's  coal.  Religion  has  been 
made  a  cloak  for  vice,  faith  has  at  times  degenerated  into  big- 
otry, and  charity  sometimes  promotes  pauperism,  but  no  one 
proposes  that  we  dispense  with  religion,  faith  or  charity. 

There  are  dangers  in  concentrated  capital  and  evils  in  indus- 
trial combinations,  but  the  problem  should  be  to  eradicate  all 
that  is  bad  and  curb  everything  that  is  threatening.  The 
wounded  soldier  was  killed  before  surgery  came  to  amputate 
a  lacerated  limb  and  give  to  its  owner  life  and  usefulness. 

The  cobbler  working  at  his  bench  must  await  his  customer 
and  to-days  patch  differs  not  a  whit  from  yesterdays ;  the  in- 
dividual workman,  with  his  one  apprentice,  can  know  at  most 
the  needs  of  his  neighborhood,  but  his  conception  of  style  and 
quality  is  no  larger  than  his  sphere  of  activity ;  the  employer  of 
a  score  of  workmen  may  become  acquainted  with  the  wants  of 
his  town,  and  in  his  leisure  hours  ascertain  enough  regarding 
the  prices  asked  by  his  competitor  to  impel  closer  attention  to 
economies  in  order  to  meet  them ;  the  head  of  a  large  concern 
sends  his  representatives  throughout  his  State,  and  in  seeking 
wider  markets  new  materials  may  be  found,  or  better  styles  and 
methods  of  manufacture  discovered. 

As  productive  methods  become  more  and  more  specialized, 
expert  management  is  more  and  more  demanded,  and  the  pur- 
chaser of  the  smallest  fraction  of  the  output  reaps  the  benefits 
of  this  superior  skill.  When  the  market  is  world-wide  we  have 
the  highest  example  of  business  acumen,  for  nothing  less  could 
search  out  unsuspected  buyers;  we  have  the  most  conservative 
management,  for  recklessness  would  be  fatal  when  months  in- 
tervene between  orders  and  settlement ;  we  have  the  closest  study 

4i  i 


of  economies  of  production,  for  loss  of  trade  has  sharpened  the 
wit  of  every  competitor;  and  we  have,  through  the  greater  elas- 
ticity of  foreign  trade,  a  more  sure  response  to  every  demand. 

The  capital  has  grown  from  the  dollar  or  two  needed  to  buy 
the  cobbler's  awl  and  hammer  to  the  millions  required  to  engage 
the  world's  trade.  These  millions  are  giving  us  cheaper  goods; 
they  are  widening  our  knowledge  and  broadening  our  sym- 
pathies; they  are  knitting  peoples  together  through  common 
wants;  they  are  steadying  economic  conditions  and  deferring 
panics ;  they  vouchsafe  to  labor  remunerative  employment ;  they 
take  materials  to  waiting  factories,  transmute  them  into  accept- 
able forms  and  set  them  down  in  every  quarter  of  the  globe 
where  lips  have  framed  a  heart's  desire. 

In  return  for  this,  these  millions  deserve  just  returns,  and  as 
long  as  they  ask  that  alone  it  will  surely  come.  And  we,  the 
beneficiaries  of  all  that  results  from  this  last  stage  in  the  eco- 
nomic development  of  our  country,  ask  a  cessation  of  the  ac- 
tivities of  those  demagogues  who,  seeking  to  emulate  others, 
ignorantly  and  evilly  assail  concentrated  capital  in  periods  of 
popular  prejudice  by  grotesque  legislation  and  hamper  its  use- 
fulness by  uneconomic  laws. 

THE  SECRETARY:  I  desire  to  read  by  title  a  paper  on 
"The  Adjustment  of  Labor  Problems  and  the  Policy  of  Incor- 
porating Unions,"  prepared  for  this  conference  by  Mr.  D.  C. 
Seitz,  of  New  York. 

Mr.  D.  C.  Seitz. 

Mr.  Chairman — During  the  War  of  the  Rebellion  Mr.  Arte- 
mus  Ward  became  weary  of  the  constant  refrain,  "Who  will 
care  for  mother  now?"  and  plaintively  asked  if  it  was  not  about 
time  somebody  looked  out  for  the  old  man. 

This  is  rapidly  becoming  the  attitude  of  a  large  number  of 
people  in  the  United  States  in  regard  to  the  labor  and  capital 
situation.  Capital  is  an  organization  per  se,  necessarily  so,  and 
labor  overcame  much  that  was  cruel  and  unjust,  and  fought  its 
way  to  fairer  conditions  through  the  organization  of  unions. 
But  it  seems  to  me  that  success  has  spoiled  both  labor  and  cap- 
ital, and  changed  what  was  planned  to  be  beneficial  and  be- 
neficent into  extortion  and  oppression,  and  that  it  is  time  for 
the  country  to  assert  the  old  rules  of  a  truly  democratic  com- 
munity of  equal  rights  and  equal  freedom  for  every  dollar  and 
every  man. 

412 


The  Emperor  Alexander,  who  sighed  for  new  worlds  to  con- 
quer, has  his  prototype  in  the  over-promoting  of  capital  and 
the  over-combination  of  corporations,  and  he  has  it  again  in  the 
labor  union,  which,  after  success  in  securing  proper  wages,  in 
enforcing  reasonable  hours,  now  tries  to  limit  production  and 
cut  down  working  time  to  an  absurd  degree,  heading,  as  it 
seems  to  me,  toward  ultimate  socialism  or  some  Utopian  basis, 
where  all  the  work  will  be  done  by  somebody  else  and  all  the 
wages  be  given  to  the  workingman. 

SCOPE  AND  SPIRIT  OF  LABOR  UNIONS. 

For  the  labor  organization  as  a  business  institution  I  have 
entire  respect,  but  it  seems  to  me  that  the  unions  are  fast  going 
beyond  it.  When  I  read  the  letters  of  Mr.  Gompers  and  other 
leaders  or  heads  of  labor  organizations  as  sent  to  various  labor 
conventions,  they  sound  to  me  like  the  utterances  of  petty 
princes  defying  the  community  at  large,  and  snapping  their 
fingers  at  the  laws  and  the  Constitution,  with  its  guarantee  of 
equal  rights,  and  demanding  privileges  that  are  denied  others 
because  they  represent  "organized"  labor.  Most  of  these  let- 
ters use  the  word  "brothers,"  but  in  the  tribal,  not  the  national 
sense.  They  frankly  array  themselves  against  the  community. 
We  have  seen  the  same  thing  done  by  capital  in  trust  and  rail- 
way transactions,  and  we  have  seen  the  unorganized  people  rise 
and  show  their  power  of  resentment  and  regulation.  Shall  we 
soon  see  the  same  thing  against  the  labor  trusts?  I  think  so, 
unless  wisdom  and  moderation  take  the  place  of  existing  poli- 
cies in  labor  organizations.  For,  after  all,  organized  labor  is 
a  very  small  proportion  of  the  industrial  community,  just  as 
organized  capital  represents  a  very  small  proportions  of  the 
aggregate  wealth.  In  the  case  of  capital,  we  are  not  called  upon 
to  have  any  special  feelings  of  humanity.  So  far  as  the  actual 
dollar  is  concerned  it  plays  a  very  small  part  in  business  affairs. 
Credit  does  most  of  the  .business,  and  business  never  catches 
up  with  credit.  In  short,  it  is  always  in  debt.  Labor,  however, 
is  an  actuality  that  must  be  met  every  Saturday  night.  If  it 
ceases  to  create,  it  starves  itself,  and  the  community  stands  still. 
Therefore  it  is  proper  that  wre  should  give  more  thought  and 
attention  to  the  problem  of  labor  than  we  should  to  the  problem 
of  the  dollar,  because,  primarily,  labor  makes  the  dollar,  and 
either  saves  or  spends  it.  In  any  event,  it  fails  into  the  open 
hopper  of  capital  and  makes  the  endless  round  back  to  labor 

4i3 


and  again  to  capital,  over  and  over  and  over  again.  When  the 
labor  question  becomes  oppressive  it  does  more  damage  than 
when  the  dollar  becomes  oppressive.  It  not  only  does  more 
damage  to  the  community  at  large,  but  it  damages  itself. 

The  Civic  Federation,  as  I  understand  it,  is  trying  to  solve, 
the  problem.  I  guess  it  is  a  problem  that  never  will  be  solved 
until  we  get  a  patent  new  kind  of  a  man,  but  I  have  a  few 
thoughts  on  the  subject,  as  every  one  should  have,  and  I  lay 
them  down  here. 

LABOR  UNIONS  SHOULD  NOT  BE  IRRESPONSIBLE. 

If  it  were  possible  to  place  everybody  in  a  community  upon 
an  equal  plane  of  prosperity,  such  as  the  Socialists  promise  and 
plan,  we  might  say  the  thing  had  been  accomplished  theoreti- 
cally. As  it  is  not  possible,  and  might  not  be  desirable,  we  will 
have  to  consider  the  case  as  it  stands.  When  one  set  of  men 
bind  themselves  together  and  say  that  they  will  only  work  un- 
der certain  conditions,  involving  not  only  hours  and  wages,  but 
the  manner  in  which  they  shall  work  and  the  amount  they  shall 
produce,  they  become  something  apart  from  the  community, 
and  to  an  extent  a  menace.  Their  motive  is,  of  course,  laud- 
able in  its  beginning.  They  wish  to  better  themselves.  But  it 
is  not  brotherly  and  not  patriotic.  It  is  simply  and  purely 
selfish.  Being,  therefore,  a  selfish  effort,  it  should  be  regulated 
as  such,  and  the  labor  union  should  be  compelled  to  put  itself 
in  the  attitude  of  the  ancient  guild  and  become  a  corporation. 
Men  of  dollars  cannot  combine  unless  they  incorporate  and 
show  a  visible  responsibility  for  their  acts.  It  is  only  the  work- 
ing-man who  is  free  to  do  as  he  pleases  without  any  responsi- 
bility at  all  in  the  majority  of  our  States.  Thanks  to  a  belief 
in  the  potency  of  labor  politically,  our  politicians  have  had  no 
courage  in  meeting  the  situation,  and  they  have  done  harm  to 
the  interests  of  labor.  Because  unions  are  more  or  less  unstable 
they  break  up.  They  indulge  in  ruinous  strikes,  and  they  bring 
hardship  and  injustice,  but  if  they  are  incorporated  and  legally 
held  responsible  for  their  acts,  leadership  would  improve  and 
the  standard  of  membership  would  be  higher,  and  the  respect 
of  the  community  would  be  considerably  enhanced.  It  is  true 
that  this  would  involve  a  financial  liability,  and  the  persons  best 
able  to  bear  it  would  have  to  share  it,  but  this  is  true  in  cor- 
porations and  in  partnerships.  If  two  men  are  in  partnership, 
and  one  is  rich  and  the  other  poor,  the  rich  man  must  bear  the 

414 


burden  of  the  poorer  man.  If  a  corporation  does  anything  that 
is  wrong  in  a  business  or  in  any  other  way,  it  is  legally  respon- 
sible to  the  extent  of  its  assets.  But  the  labor  union  may  be 
as  wanton  as  it  pleases,  may  break  faith  and  men's  heads  with 
equal  recklessness,  and  make  the  excuse  that  it  is  the  union. 
This  does  not  seem  to  me  to  be  either  American  or  right.  It  is 
not  fair,  and  the  unions  show  their  weakness  when  they  almost 
unanimously  set  their  faces  against  incorporation.  They  do  not 
want  to  be  responsible  for  what  they  do.  They  want  privileges 
over  and  abpve  those  of  other  people,  and  they  wish  to  be  free 
to  act  as  badly  as  they  may  under  any  and  all  circumstances. 
When  you  read  of  a  labor  union  making  rules  that  its  members 
must  not  belong  to  the  State  militia,  which  might  be  called  upon 
to  turn  against  their  "brothers"  in  a  labor  riot,  they  cease  to 
be  American  citizens,  and  they  set  themselves  up  as  a  tribe 
within  our  borders.  They  are  like  the  Six  Nations,  dealt  with 
outside  the  Constitution  and  outside  the  law.  Why  they  insist 
upon  maintaining  this  position  is  something  I  never  could  com- 
prehend. The  capitalists,  who  are  so  freely  denounced,  incor- 
porate and  meet  the  collective  responsibility.  We  have  heard 
much  of  late  of  lawless  corporations.  They  have  been  lawless, 
and  the  law  is  reaching  out  and  taking  hold  of  them.  But  the 
lawless  labor  union  continues  to  be  immune  except  in  the  rarest 
instances,  and  these  instances  are  bitterly  resented.  The  cam- 
paign made  by  the  labor  unions  against  justice  in  the  Haywood 
case  is  a  sample.  Here  was  a  man  who  probably  felt  no  moral 
responsibility  at  all.  There  was  a  war  between  labor  and  cap- 
ital. Both  sides  forgot  morals.  Both  forgot  the  commandment, 
"Thou  shalt  not  kill."  His  organization  was  involved  in  many 
desperate  affairs,  and  yet  when  he  was  placed  upon  trial  con- 
solidated labor  throughout  the  country  denounced  in  advance 
what  turned  out  to  be  a  most  exemplary,. orderly  and  just  hear- 
ing, and  Mr.  Haywood  was  acquitted  despite  the  clamor.  So 
the  institutions  of  the  country  stand  in  spite  of  the  denuncia- 
tion, and  the  institutions  of  the  country  will  continue  to  stand. 
The  things  that  go  down  will  be  the  illegal,  disorderly  and  un- 
reliable labor  unions. 

STRIKES  DISASTROUS. 

There  should  be  no  strikes.  Whether  they  succeed  or  fail 
they  spell  disaster.  I  believe  it  is  always  possible  to  win  a  just 
cause  by  agitation — patient,  unrelenting  agitation.     I   believe 

4i5 


that  men  should  stay  on  their  jobs  and  do  their  work,  and  not 
waste  time  and  money  in  strikes.  My  experience  with  em- 
ployers has  taught  me  that,  as  a  rule,  they  will  always  yield  to 
public  pressure.  The  corporation  that  is  dealing  with  the  public 
cannot  afford  to  be  unfair,  when  the  facts  are  widely  known, 
and  a  strike  which  involves  the  public,  though  against  the  same 
corporation,  will  almost  always  fail.  We  have  seldom  had  suc- 
cessful transportation  strikes,  for  example.  In  New  York  there 
is  considerable  resentment  against  the  traction  companies.  But 
the  last  strike  failed.  People  would  not  walk.  If  the  money 
wasted  by  that  union  had  been  spent  in  agitation  and  in  telling 
the  people  how  unjust  and  mean  this  company  was,  it  could  not 
have  stood  the  pressure  three  months.  But  when  the  public 
had  to  walk  it  promptly  lost  interest  in  the  strike,  as  it  always 
will. 

I  do  not  regard  the  telegraph  operator  as  a  laborer  in  any 
sense,  but  as  a  professional  man.  The  telegraph  strike  was  a 
costly  affair  to  the  men  and  to  the  companies,  and  public  agi- 
tation, properly  managed,  would  unquestionably  have  remedied 
all  grievances  within  a  quarter  of  a  year.  A  strike  has  always 
seemed  to  me  to  be  a  species  of  fever  that  left  the  patient  weaker 
than  before. 

EMPLOYERS  SHOULD  RECOGNIZE  WELL-ORGANIZED  UNIONS. 

I  say  very  frankly  that  I  have  no  sympathy  with  employers 
who,  having  union  labor,  endeavor  to  evade  the  relationship. 
A  good  many  rows  have  been  started  by  the  announcement  of 
a  chesty  employer  that  he  would  only  deal  with  his  own  men. 
Now,  there  are  a  good  many  perfectly  sane  reasons  why  an 
employer  cannot  be  trusted  to  deal  with  his  own  men.  Some 
employers  are  arrogant,  arbitrary  and  revengeful,  and  they 
would  be  apt  to  blacklist  the  man  or  men  who  had  the  courage 
to  meet  them.  This  is  especially  true  in  large  factories, 
where  one  man  more  or  less  does  not  count.  This  policy  on  the 
part  of  employers  usually  takes  the  following  course :  The  agent 
of  the  union  calls,  and  he  will  not  be  seen.  He  calls  again  and 
cannot  get  in.  He  calls  a  third  or  fourth  time  and  irets  in,  and 
is  told  very  loudly  that  the  proprietor  will  deal  only  with  his 
own  workmen.  Then  a  walking  delegate,  in  order  to  demon- 
strate his  fitness  for  his  office,  must  necessarily  make  trouble, 
whereas,  if  the  employer  took  the  sane  view  that  the  men  them- 
selves have  elected  to  put  their  affairs  in  the  hands  of  an  in- 

416 


dividual  or  committee,  and  have  ceased  to  be  individuals  them- 
selves, but  a  mass,  he  would  get  along  much  better.  The  mem- 
bers of  the  American  Newspaper  Publishers'  Association  adopt- 
ed this  line  of  policy  more  than  five  years  ago,  and  have  had 
singular  success  in  getting  along  with  their  departments.  This 
does  not  mean  that  we  have  been  without  friction,  but  strikes 
have  been  few,  and,  on  the  whole,  the  relationship  has  been 
agreeable.  Moreover,  many  employers  fail  to  read  the  rules  of 
the  labor  organizations,  and  this  ignorance  leads  to  mix-ups. 
I  have  studied  the  rules  of  at  least  seven  organizations,  and  I 
am  bound  to  say  that  they  are  all  framed  equably  and  in  the 
interests  of  both  sides.  The  rights  of  the  employers  are  almost 
always  respected,  while  the  rights  of  individuals  are  usually 
defined  so  clearly  as  to  be  in  the  interest  of  the  employer.  The 
men  must  obey,  and  this  obedience  is  something  the  employer 
himself  could  hardly  enforce  with  the  same  thoroughness  as  the 
union  does.  His  only  penalty  is  dismissal  or  suspension,  where- 
as unions  can  make  employment  impossible  for  a  disobedient 
member.  My  attitude,  therefore,  is  that  where  unions  prevail 
they  should  be  dealt  with  according  to  union  methods,  and  the 
unions  should  be  compelled  to  carry  out  the  responsibilities 
they  assume. 

This  has  not  brought  about  a  millennium  by  any  means,  but 
it  has  brought  about  a  much  better  understanding,  minimized 
trouble  and  enforced  discipline.  Some  radical  bodies  either  mis- 
interpret or  neglect  their  governing  rules,  and  an  appeal  to  the 
international  body  has  usually  brought  regulation  and  correc- 
tion. It  is  only  natural  that  the  walking  delegate  who  is 
spurned  and  kicked  out  should  feel  revengeful,  and,  of  course, 
the  employer  who  says,  "I  want  to  run  my  own  business  in  my 
own  way/'  has  a  right  to  think  so.  But  how  many  of  us  can  run 
anything  in  our  own  way  and  as  we  want  to?  Is  not  the  world 
such  a  complex  organization  as  to  make  this  next  to  impos- 
sible? If  one  is  to  have  comfort,  convenience,  and  other  desir- 
able commodities  of  civilization  he  must  have  the  help  of  others. 
If  it  is  decided  that  they  wish  to  convey  this  help  in  a  certain 
way,  will  he  not  after  all  get  the  best  results  by  accepting  that 
way  and  make  it  serve  his  own?  Moreover,  human  nature  is 
to  be  considered.  When  a  business  agent  undertakes  to  act 
for  an  employer  as  a  representative,  he  must  stand,  to  a  certain 
extent,  between  the  employer  and  the  union,  and  if  the  agent 
is  honest  this  is  an  advantage.     If  he  is  not  honest  he  is  easily 

417 


disposed  of.  Employers  have  sometimes  felt  that  they  were 
better  off  with  a  dishonest  than  with  an  honest  agent,  and  this 
led  to  blackmail  and  scandal,  for  which  the  employer  is  not  en- 
titled to  the  slightest  sympathy.  The  man  who  permits  himself 
to  be  blackmailed  to  save  trouble  or  expense  is  just  as  guilty 
as  the  blackmailer. 

Personally,  in  a  long  experience  with  business  agents,  I  never 
detected  the  slightest  effort  at  personal  advantage.  This  ap- 
plies to  the  printing  trades  in  every  branch.  I  have  made  it  a 
rule  not  to  deal  with  our  own  men.  This  prevents  frequent  in- 
terruptions and  the  creation  of  trouble,  and  it  strengthens  the 
power  of  the  business  agents  and  officers  of  the  unions.  If  you 
are  to  have  government  and  discipline  you  must  do  this,  and 
not  go  behind  their  backs.  If  a  chapel  feels  that  it  can  get 
away  with  the  management  it  will  do  so  in  spite  of  union  rules 
or  anything  else.  It  is  wisest  and  safest  to  rely  fully  upon  the 
union. 

I  have  been  talking  about  conditions  as  they  are,  and  not  as 
they  ought  to  be,  and  I  do  not  know  why  I  should  waste  your 
time  on  ideals.  When  Mr.  Seward  said  of  slavery  that  it  was 
an  irrepressible  conflict  between  opposing  and  contending 
forces,  he  wrote  a  phrase  that  applies  with  equal  correctness  t» 
labor,  capital  and  the  community  at  large.  I  think  we  dwell 
too  much  upon  the  phrase  capital  and  labor  in  this  problem, 
because,  after  all,  labor's  relation  with  capital  is  not  so  large  as 
labor's  relation  with  the  individual,  with  the  multitude  of  fam- 
ily servants,  the  army  of  public  workers,  the  little  shops  of  the 
shoemaker,  the  barber,  the  carpenter  and  the  tinker,  where  cap- 
ital is  practically  not  represented  at  all,  and  where  the  profits 
of  the  establishment  barely  exceed  those  of  the  average  union 
laborer.  Here  is  where  the  pinch  comes,  not  against  the  great 
corporation  with  its  ability  to  punish  the  public,  but  from  people 
who  are  in  such  close  competition  that  they  have  no  remedy  at 
all  against  a  labor  trust  which  feeds  upon  them  through  its  re- 
lations with  capital  and  the  oppressions  aforesaid — in  the  re- 
pair of  a  roof,  in  the  fixing  of  a  range,  in  the  price  of  food  and 
clothes,  and  in  the  mending  of  the  plumbing. 

I  have  often  said  that  the  worst  enemy  one  can  have  is  the 
little  enemy,  while  a  large  enemy  invites  opprobrium  and  re- 
sentment, so  that  when  labor  extends  itself  into  the  small  com- 
munities and  works  hardships  against  families,  and  encamps 
itself  like  a   company  of  condottieri  upon   the  community,  the 

418 


community  sooner  or  later  is  going  to  rise  up  and  wipe  it  out. 

A  responsible  corporation,  well  managed  and  financially 
strong,  is  a  benefit  to  the  community.  A  labor  union,  incor- 
porated, conservative,  industrious,  and  whose  main  object  it 
should  be  to  see  that  its  members  are  competent,  that  they  shall 
all  be  employed,  and  that  they  shall  do  their  work  well  is  an 
equal  benefit  to  a  community.  A  labor  organization  that  is 
predatory,  the  prey  of  politicians,  and  a  victim  of  designing 
officers  and  imported  agitators,  is  a  nuisance  and  ought  to  be 
displaced.  Incorporation  would  bring  this  about,  and  the  Civic 
Federation  can  perform  no  greater  task  than  urging  such  a 
movement  to  completion. 

THE  CHAIRMAN:  Gentlemen,  the  floor  is  yours  on  the 
general  topic  of  the  conference,  'The  Benefits  of  Trusts  and 
Combination  and  Their  Evils ;  How  to  Exterminate  the  Evils 
and  Conserve  the  Benefits ;"  at  least,  such  is  my  interpretation 
of  the  subject. 

MR.  BINGHAM  (Indiana)  :  Mr.  Chairman— I  have  cer- 
tainly been  interested  in  the  portion  of  this  conference  which  I 
have  heard  to-day,  and  I  have  certainly  acquired  considerable  in- 
formation that  I  never  before  knew.  I  have  learned  that  the 
druggists,  wholesale  and  retail,  only  make  about  3  per  cent,  profit. 
Now,  when  I  used  to  dig  gentian  and  sell  it  to  the  druggist  and 
buy  it  back  as  something  else — the  Lord  only  knows  what — I 
thought  the  profit  was  greater  than  that,  and  the  same  with  red 
pepper  and  a  good  many  articles  that  I  could  name. 

But  one  thing  has  occurred  to  me  as  rather  peculiar.  It  may 
be  that  I  am  a  little  dense,  but  it  seemed  to  me  that  the  theory 
of  some  of  the  gentlemen^who  spoke  here  to-day  during  the 
conference  is  that  the  danger  is  from  the  man  who  cuts  the 
price ;  that  there  ought  to  be  permission  to  have  some  sort  of 
a  combination  whereby  you  can  take  the  man  by  the  throat  who 
cuts  the  price  and  stop  him ;  but  there  ought  not  to  be  any  way 
by  which  the  people  could  say  the  man  who  puts  on  the  profit 
should  be  stopped  anywhere.  That  strikes  me  as  rather  a  pe- 
culiar view  of  this  question,  for  I  believe  the  man  who  puts  on 
the  profit  is  a  more  dangerous  man  than  the  man  who  cuts  the 
price,  so  far  as  the  people  are  concerned.  The  man  who  cuts 
the  price  will  quit  business  in  a  little  while,  but  the  man  who 
puts  on  the  profit  will  keep  on  putting  on  the  profit,  and  I  am 
inclined  to  think,  along  with  Mr.  Smith,  that  there  ought  to  be 

419 


some  sort  of  supervision.  I  do  not  agree  that  the  Sherman 
Law  should  be  repealed.  I  think  a  fine  of  twenty-nine  million 
dollars  occasionally  is  pretty  good.  I  think  it  has  a  pretty  good 
effect.  I  do  not  believe  prosecution  will  accomplish  everything 
that  ought  to  be  accomplished,  but  it  is  a  gentle  reminder  to 
have  a  statute  of  that  kind  on  the  books. 

In  Indiana  we  have  a  law  that  makes  it  a  crime  and  an  offense 
for  a  man  to  swear  in  public.  Notwithstanding  that  law,  as 
strange  as  it  may  seem,  occasionally  there  is  a  man  down  there 
that  does  swear  in  public,  but  whenever  a  man  makes  a  fool  of 
himself  and  becomes  objectionable  to  the  public  he  is  prose- 
cuted under  that  law ;  and  so  with  the  Sherman  Law. 

Now,  if  I  could  assume,  as  the  gentleman  from  Detroit  did 
who  read  the  paper,  that  profits  were  only  reasonable  and 
prices  were  only  reasonable,  and  that  they  were  always  reason- 
able, then  I  could  agree  with  that  view.  The  Standard  Oil  Com- 
pany was  referred  to.  A  man  who  studies  the  history  of  that 
institution,  and  knows  that  the  States  of  this  Union  have  been 
divided  up  into  territory  between  two  corporations  owned  by 
the  Standard  Oil  Company,  and  that  whenever  an  independent 
man  undertook  to  go  into  business  it  was  so  arranged  that  the 
railroad  company  advised  the  Standard  Oil  Company,  and  the 
representative  followed  the  tank  of  oil  and  went  into  the  com- 
munity and  destroyed  the  price  of  oil,  until  the  independent  man 
was  run  out  of  business 

THE  CHAIRMAN :  I  am  sorry  to  interrupt  the  speaker, 
but  his  time  is  up. 

MR.  ALBERT  HIBBERT  (Massachusetts) :  Mr.  Chairman 
— I  am  sent  here  by  the  courtesy  of  the  Governor  of  the  Com- 
monwealth of  Massachusetts  because  of  my  connection,  I  sup- 
pose, with  the  great  textile  trade  of  that  State.  I  have  been  much 
interested  in  listening  to  the  several  papers  read  by  economists 
and  by  other  people  here,  and  I  was  particularly  impressed  by 
the  statement  made  by  one  of  the  professors,  that  at  least  one  de- 
partment in  this  country  had  determined  that  a  uniform  system 
of  bookkeeping  should  be  inaugurated  for  the  purpose  of  giving 
an  opportunity  to  whoever  might  desire  to  learn  the  true  facts. 

I  was  particularly  reminded  at  that  time  of  an  occurrence 
that  came  under  my  personal  observation  in  the  city  of  Lowell 
some  years  ago.  The  textile  workers  were  on  strike,  and  we 
were  in  conference  with  the  manufacturers  trying  to  come  to 
some  amicable  arrangement,  and  somebody  suggested  that  in 

420 


order  that  the  statements  made  by  the  manufacturers  of  that 
place  could  be  verified,  that  an  examination  of  the  books  take 
place,  and  this  significant  remark  was  made  by  the  spokesman 
of  the  manufacturer,  who  said:  "Gentlemen,  the  examination 
of  our  books  would  be  of  no  value  to  you,  because  the  art  of 
bookkeeping  nowadays  is  to  conceal  the  fact  rather  than  reveal 
it."  Now,  if  that  is  the  standard  way  of  keeping  books,  prob- 
ably a  statute  law  that  would  eliminate  that  particular  kind  of 
art  might  be  beneficial. 

I  heard  with  interest  the  complaint  of  the  combination  of 
druggists  and  furniture  dealers  this  morning,  and  to  a  trade 
unionist  it  appears  amusing.  I  think  we  all  agree  that  the  great 
majority  of  the  people  prefer  to  buy  in  the  lowest  market,  and 
it  would  be  idiotic  on  the  part  of  any  person  to  expect  a 
woman  of  moderate  means  to  go  to  a  drug  store  and  pay  one 
dollar  a  bottle  for  some  proprietary  medicine  when  she  could 
purchase  the  same  article  at  sixty-five  cents  in  a  department 
store.  If  the  druggist  has  any  grievance  at  all  it  is  not  against 
the  provisions  of  the  Sherman  Act,  but  against  the  proprietors 
of  department  stores.  He  is  at  liberty,  if  he  sees  fit,  to  go  into 
the  same  kind  of  business  that  the  department  store  does  by 
combination.  My  personal  opinion  in  regard  to  this  conference 
is  this:  That  if  we  can  only  succeed  in  adopting  one  resolution 
that  will  have  for  its  object  a  better  understanding  and  a  more 
liberal  enforcement  of  the  provisions  of  the  Sherman  Act,  we 
will  have  more  than  justified  our  existence. 

MR.  J.  W.  KINNEAR  (Pennsylvania)  :  Mr.  Chairman— Had 
I  known  that  my  absence  from  home  would  have  occasioned 
such  a  flurry  in  financial  circles  I  would  not  have  been  here. 
We  have  had  a  practical  illustration  of  one  thing,  and  that  is 
that  honest  men  may  differ  on  the  same  subject. 

We  have  listened  to  all  sides  and  phases  of  certain  questions ; 
every  one  has  had  a  respectful  attention  and  a  fair  share  of  ap- 
plause; and  this  is  as  it  should  be  in  a  meeting  of  this  kind.  I 
am  not  an  advocate  of  the  Sherman  Law,  but  after  listening  to 
some  of  the  addresses  this  morning  I  believe  it  is  well  to  let 
the  Sherman  Law  stand  until  we  have  something  better  to  take 
its  place.  It  has  been  stated  here,  with  a  great  deal  of  truth, 
as  we  all  know,  that  over-capitalization  is  one  of  the  great  evils 
that  we  have  to  contend  with.  In  all  our  cities  we  have  prac- 
tical illustrations  of  this.  We  have  corporations  with  capitals 
four  or  five  times  larger  than  is  necessary  to  conduct  and  man- 

421 


age  their  business.  Let  me  say  to  you  that  with  a  great  part 
of  this  capital  nothing  was  paid  for,  and  I  want  to  mention  one 
thing  that  has  been  hinted  at  several  times,  and  that  I  think 
would  help  greatly  in  the  matter  of  capitalization.  As  you  all 
know,  the  laws  of  every  State  presuppose  that  full  value  is  to 
be  given  for  stock  issued,  and  you  all  know  how  easily  this  is 
overcome.  Many  of  our  States,  and  even  some  of  our  Western 
Territories,  take  pleasure  in  advertising  that  property  and  ser- 
vices may  be  exchanged  for  stock ;  property  costing  ten  dollars 
is  frequently  put  in  at  one  thousand  dollars,  and  thus  property 
is  put  into  the  corporation  that  is  actually  worth  nothing.  Then 
comes  the  grinding  down  of  labor  and  poor  service  in  order  to 
make  dividends  upon  inflated  capitalization.  The  laws  presup- 
pose full  value.  Why  not  compel  and  enforce  full  value  for 
every  share  of  stock  that  is  issued?  This  can  be  done  by  super- 
vision. The  laws  to-day  contemplate  it,  but  it  is  a  mere  mock- 
ery. Every  State  permits  property  and  services  to  be  given  in 
exchange  for  stock.  If  the  values  of  property  were  supervised, 
if  anything  except  cash  were  supervised,  and  the  corporations 
received  full  value,  we  would  not  have  the  over-capitalization 
that  we  have  to-day. 

MR.  KARL  MATHIE  (Minnesota)  :  Mr.  Chairman— I  would 
like  to  say  something  about  what  was  brought  out  by  one  of 
the  speakers  this  morning,  Mr.  Ridder,  as  the  manager  of  a 
paper  mill  that  knows  nothing  about  the  paper  trust.  The  first 
thing  that  our  friend  brought  out  was  the  fact  that  the  publish- 
ing business  had  increased  enormously  in  the  last  five  years ; 
that  there  has  been  enormous  demand  for  white  paper  in  five 
years  ;  that  the  increase  in  demand  for  white  paper  had  been  some- 
thing like  70  per  cent.  Then  he  says  the  International  Paper  Com- 
pany, which  he  calls  the  trust,  is  making  less  paper  to-day  than 
it  did  several  years  ago.  That  is  true  as  to  white  paper  for 
newspapers.  They  found  some  of  their  mills  were  not  making 
money,  and  they  closed  them,  or  they  made  another  grade  of 
paper,  just  as  a  newspaper  would  close  up  its  business  if  it  did 
not  pay ;  and  he  says  that  they  cannot  get  bids  from  some  paper 
mill.  That  is  also  true,  and  I  will  tell  you  why. 

In  Ohio  there  is  a  combination  of  all  the  daily  newspapers, 
and  in  this  State  there  is  one.  There  is  the  Illinois  Daily  Press 
Association,  or  Daily  Paper  Association.  They  come  in  with 
about  forty  or  eighty  different  requirements,  and  want  one  or 
two  mills  to  bid  on  them,  and,  of  course,  at  the  same  time  they 

^22 


say,  in  public,  they  are  almost  on  the  brink  of  financial  ruin 
and  want  us  to  take  chances.  Another  reason  is  this :  I  know 
one  newspaper  that  got  only  one  bid  for  its  new  contract  of 
almost  one-quarter  of  a  million  dollars,  and  why?  Because  of 
the  treatment  that  newspaper  publisher  or  manager  gave  the 
mill  he  dealt  with. 

He  also  spoke  of  the  fact  that  they  were  up  against  a  mo- 
nopoly in  getting  their  Associated  Press  dispatches,  but  why 
should  he  object?  He  is  a  member  of  that  association.  What 
is  more,  if  I  want  to  start  a  newspaper  in  Minneapolis  I  can't 
do  it  without  asking  the  consent  of  the  two  Minneapolis  papers. 
They  have  a  /monopoly  of  the  news.  What  about  that?  If 
there  is  a  trust  it  might  be  the  International  Paper  Company, 
which  has  three-sevenths  of  the  output — not  enough  to  con- 
stitute a  trust.  But  there  may  be  a  trust.  You  have  read  in 
the  newspapers  of  Hammerstadt,  who  brought  out  the  paper 
trust,  to  bring  them  into  a  combination.  I  am  reliably  informed 
that  the  Standard  Oil  Company  is  back  of  them;  and  wouldn't 
it  be  a  beautiful  case  of  justice  if  the  Standard  Oil  Company 
could  get  hold  of  all  their  paper  and  bring  it  up  to  trust  figures 
in  return  for  the  roastings  of  the  newspapers! 

MR.  MARBURG  (Maryland)  :  Mr.  Chairman— There  is  one 
point  which  it  seems  important  for  me  to  advance  in  view  of 
the  fact  that  we  shall  probably  have  some  resolutions  favoring 
laws  regulating  over-capitalization.  It  relates  to  the  question 
propounded  by  Professor  Jenks  as  to  whether  corporations 
should  be  allowed  to  capitalize  the  good  will  and  earning  power, 
patents  and  things  of  that  sort.  My  answer  to  that  is  that  they 
should  be  allowed  none  of  these  things ;  that  capitalization 
should  stand  for  actual  values  paid  in.  I  mean  by  values,  money 
and  profit  that  any  earning  power,  whether  it  comes  from  good 
will  or  comes  from  patronage  or  superior  intelligence  or  repu- 
tation— any  special  privileges  or  advantages  will  show  them- 
selves at  the  price  at  which  the  promoters  will  be  able  to  mar- 
ket that  stock.  If  the  power  one  hundred  represents  only  the 
property,  and  the  earning  power  is  50  per  cent,  of  that,  that 
stock  will  probably  sell  at  four  hundred.  So  that  the  men  who 
promote  the  enterprise  are  not  sufferers  by  such  law.  The 
stock  will  demand  a  premium  according  to  its  value,  and  there 
is  no  fundamental  objection  that  follows  the  French  practice 
that  pertains  to  railways  of  limiting  capitalization  to  property 
and  value  paid  in.    With  respect  to  public  service  corporations, 

423 


if  such  a  rule  obtained  you  would  very  soon  find  out  what  the 
value  of  the  franchise  was.  If  $1,000,000  is  put  into  a  street 
railway  and  it  is  capitalized  for  $1,000,000,  and  its  stock  pro- 
ceeds to  sell  for  400  or  500,  the  surplus  will  show  what  the  cash 
price  is  and  throw  light  upon  the  duty  of  the  city  or  the  State 
with  respect  to  a  proper  tax  upon  it. 

MR.  M.  N.  KLINE  (Pennsylvania)  :  Mr.  Chairman— I  ri^e 
to  say  a  few  words  in  reply  to  two  speeches  that  were  made  at 
the  beginning  of  this  discussion.  I  think  it  ought  to  be  said 
in  reply  to  the  two  gentlemen  who  referred  to  the  down-trod- 
den druggists,  that  there  is  another  side  to  the  question  which 
each  one,  I  hope,  will  consider.  The  gentleman  representing 
the  textile  workers  said  that  it  went  without  saying  that  the 
consumer  would  buy  from  the  lowest  seller.  Now,  I  want  to 
know,  and  I  would  like  him  to  answer,  whether  he,  in  his  union, 
is  willing  to  advocate  that  principle  as  applying  to  labor.  And 
I  want  to  know  further,  whether  he  has  ever  studied,  as  some 
of  us  have,  the  question  of  the  time,  of  preparation,  the  number 
of  hours  of  labor  that  the  druggist,  whom  everybody  sneers  at 
because  they  think  all  his  wares  are  all  profit,  puts  in  in  con- 
nection with  his  work.  Does  he  know,  or  do  the  people  here 
know,  that  sixteen  hours  a  day  would  constitute  about  a  day's 
work  of  the  man  that  supplies  the  medicine,  and  that  365  days,  not 
364,  in  every  year,  practically,  have  to  be  devoted  to  that,  and 
when  he  knows  that  he  is  willing  to  get  up  and  say  that  he 
ought  to  be  subjected  to  the  competition  of  the  department 
stores,  where  these  medicines  are  handed  out  without  prepara- 
tion, while  the  druggist  is  obliged  to  have  four  years'  practical 
experience  before  he  is  ever  permitted,  under  the  laws  of  most 
of  the  States,  to  practice  his  profession,  so  far  as  it  is  a  pro- 
fession ;  where  he  is  obliged  to  undergo  that  preparation  before 
he  can  begin  to  hand  out  what  the  six-dollars-a-week  girl  in 
the  department  store  hands  out  without  a  profit  for  the  sake  of 
advertising?  I  want  to  say  to  Mr.  Bingham  and  the  other  gen- 
tleman that  these  are  questions  that  ought  to  be  considered 
when  the  whole  question  that  has  been  touched  upon  by  them  is 
taken  under  consideration. 

MR.  HIBBERT  (Massachusetts):  May  I  reply  to  that  ques- 
tion, Mr.  Chairman? 

THE  CHAIRMAN :  If  there  is  no  objection,  you  may  have 
the  floor  to  reply  to  that  question. 

424 


MR.  HIBBERT:  In  answer  to  the  gentleman,  I  want  to 
say  when  the  time  comes  that  labor  unions  can  regulate  the 
supply  and  demand,  that  will  be  the  time  for  me  to  say  that  we 
will  not  go  into  the  lowest  market;  but  in  my  particular  trade 
our  people  are  compelled,  from  the  fact  that  they  receive  very 
low  wages  and  for  ten  and  a  half  hours'  work  don't  get  half 
as  much  as  the  drug  clerk — they  are  compelled  to  go  into  the 
lowest  market.  As  to  the  particular  part  of  the  drug  business 
that  I  referred  to,  namely,  the  proprietary  medicines,  in  which 
the  department  store  deals  largely,  I  want  to  say  that  the 
twenty-five-cents-a-day  boy  who  has  any  education  at  all  can 
tell  Peruna  from  some  other  patent  medicine,  and  he  can  hand 
it  out.  I  am  not  talking  about  people  who  put  up  prescriptions. 
The  complaint  was  not  made,  as  I  understand  it,  that  the  par- 
ticular grievance  was  the  filling  of  prescriptions.  The  particu- 
lar grievance  was,  as  complained  of,  that  the  department  stores 
were  taking  away  from  the  drug  stores  their  profits  in  the  pro- 
prietary medicine  business,  and  I  venture  to  say  that  I  can  go 
into  any  department  store  or  any  drug  store  and  give  perfect 
satisfaction  as  a  clerk  if  my  whole  duties  are  to  hand  out  pro- 
prietary medicines  called  for. 

PROF.  J.  H.  GORE  (District  of  Columbia)  :  Mr.  Chairman 
— There  is  one  subject  I  hoped  might  be  referred  to.  I  feel  some 
hesitancy  about  mentioning  it,  because  it  is  in  the  nature  of  criti- 
cism in  regard  to  the  administration  of  affairs  in  my  own  city,  the 
National  Capital. 

With  the  blanket  form  of  the  present  Sherman  Law,  the  uncer- 
tainty as  to  what  it  may  be  construed  to  mean,  and  v/hat  actions 
may  at  any  time  be  brought  under  its  provisions,  you  can  realize 
that  every  one  of  the  344,  according  to  some  estimates,  and  900. 
according  to  others,  of  establishments  that  might  be  classed  as 
trusts  or  combinations  in  restraint  of  trade — any  one  of  these, 
I  say,  may  come  under  the  ban  of  the  Attorney-General.  He 
may  announce  to-morrow,  in  the  daily  press,  and  have  it  tele- 
graphed over  the  entire  country,  that  he  will  at  once  proceed  to 
bring  suit  against  this,  that  or  the  other  trust,  and  any  business 
in  which  you  are  engaged  or  concerned  may  come  under  the 
ban  to-morrow  or  the  day  after.  If  the  Sherman  Act  were  so 
modified,  so  brought  down  as  to  be  of  a  specific  character, 
there  would  be  less  of  this  danger.  You  realize  at  once  how  all 
this  sort  of  stir  that  we  have  been  having  the  last  three  or  four 
months  throws  suspicion  on  the  business  of  the  country,  and 

.425 


influences  the  people  to  look  with  concern,  with  fear  and  dis- 
trusts upon  concerns  which  are  perfectly  solvent,  doing  a  legiti- 
mate business,  and  are  beneficent  in  their  operations. 

MR.  WESTERFIELD  (Illinois)  :  Mr.  Chairman— A  great 
deal  has  been  said,  both  this  forenoon  and  this  afternoon,  re- 
garding the  retail  associations,  and  I  believe  it  my  duty,  rep- 
resenting a  class  of  retailers — in  fact,  the  largest  class  in  this 
country — to  say  something  on  their  behalf — the  Retail  Grocers' 
Association — in  order  that  no  false  impression  might  go  forth. 
I  have  the  honor  to  represent,  perhaps,  a  class  of  small  dealers, 
but  in  numbers  a  large  class ;  a  class  with  whose  members  you 
come  in  daily  contact  by  sheer  necessity;  you  cannot  do  with- 
out us  whether  you  are  sick  or  whether  you  are  well.  A  great 
deal  has  been  said  about  retail  organizations  being  formed  for 
the  express  purpose  of  forming  agreements  with  the  manufac- 
turers or  jobbers  to  boost  prices.  I  want  to  be  strictly  under- 
stood that  in  the  case  of  the  retail  grocers  no  such  agreement 
has  existed  in  the  past,  nor  will  exist  in  the  future.  We,  indi- 
vidually and  as  an  association,  feel  able  amply  to  take  care  6! 
our  own  interests  for  this  reason — there  are  two  reasons,  in 
fact :  I  take  into  consideration  in  business,  whether  it  is  whole- 
sale or  retail,  two  factors — one,  market  conditions,  and  the 
other,  expenses  of  doing  business.  We  cannot  get  away  from 
market  conditions.  Perhaps  in  some  cases  we  may  not  have  an 
even  chance  with  very  large  purchasers,  but  upon  the  whole 
there  are  very  slight  variations  between  the  purchase  price  of 
the  average  retail  grocer  and  the  purchase  price  which  the  de- 
partment store  has  to  pay.  Another  important  item  is  the  item 
of  expense,  and  that  is  where  we  have  the  department  store 
beaten  to  a  frazzle.  I  have  got  it  upon  good  authority  from 
some  department  stores  of  this  city  that  their  expense  of  doing 
business  is  21  per  cent,  of  the  business  they  do.  I  can  answer 
for  the  retail  grocers  that  their  expense  is  only  about  11,  and 
in  some  cases  about  12  per  cent.  Can  you  see  the  difference? 
Therefore,  I  want  it  to  be  understood  that  in  our  trade  there 
has  been  no  necessity,  and  I  don't  believe  there  ever  will  be 
any  necessity,  for  forming  combinations  of  manufacturers  or 
jobbers  for  the  purpose  of  boosting  prices. 

As  far  as  the  Sherman  Act  is  concerned,  I  can  see  a  great 
many  instances  where,  perhaps,  it  prevents  retailers  from  com- 
bining and  regulating  their  affairs  in  a  measure  which  would  be 
beneficial  to  the  country,  but  I  am  in  favor  of  never  repealing 


the  Sherman  Anti-Trust  Act  until  we  have  something  better  to 
replace  it.  I  believe,  whether  it  is  a  retailers'  organization  or  a 
great  trust,  the  minute  you  throw  the  gates  wide  open — what 
will  you  have?  Worse  conditions  than  those  prevailing  at  the 
present  time,  and  the  Lord  knows  what  would  follow.  I  have 
only  made  these  few  remarks  to  take  away  the  impression  that 
the  retail  grocers  might  at  some  time  combine  and  boost  prices 
so  that  you  could  not  afford  to  live  any  more. 

SECRETARY  REYNOLDS :  I  would  like  to  ask  any  gen- 
tlemen who  have  prepared  papers,  and  who,  instead  of  reading 
the  papers,  spoke  extemporaneously,  to  be  sure  to  hand  the  paper 
to  me  or  to  the  recording  secretary,  so  that  it  can  be  printed  in 
the  proceedings  of  this  convention. 

The  closing  session  of  the  convention  will  be  held  to-morrow 
morning.  There  is  one  more  phase  of  the  general  subject  be- 
fore us  for  consideration,  of  which  it  would  seem  we  should 
hear  something  before  proceeding  to  the  discussion  of  the  res- 
olutions. That  is  to  say,  the  subject  of  the  relation  of  the 
tariff  and  the  trusts.  The  Committee  on  Program,  therefore, 
asks  that  the  delegates  be  here  to-morrow  morning  at  to 
o'clock.  We  have  three  speakers  who  are  very  well  informed 
on  this  subject,  and  I  am  sure  they  can  present  both  sides  of 
the  case  to  you  in  a  form  that  will  be  interesting  to  you  all — 
Mr.  Byron  Holt,  Mr.  Franklin  Pierce,  Mr.  Wilbur  F.  Wake- 
man — and  those  gentlemen  will  have  until  n  o'clock.  At  n 
o'clock  sharp  the  meeting  will  hear  the  report  of  the  Con  unit- 
tee  on  Resolutions,  and  the  rest  of  the  forenoon  will  be  spent 
as  the  conference  may  dictate,  in  the  consideration  of  the  res- 
olutions. The  speakers  represent  the  Free  Trade  League  and 
the  Protective  Tariff  League,  so  that  you  will  undoubtedly  get 
a  clear-cut  and  strong  statement  of  each  side  of  the  case. 

THE  CHAIRMAN:  Gentlemen,  the  floor  is  still  yours  if 
any  one  has  anything  further  by  way  of  discussion. 

MR.  JOHN  F.  HOGAN  (Michigan )  :  Mr.  Chairman— There 
is  one  subject  that  has  not  been  touched  upon  in  the  proceed- 
ings thus  far ;  that  is,  our  means  of  knowing  what  trusts  are — 
whether  they  are  good  things  to  be  helped  along,  or  dangerous 

427 


things  to  be  curbed.     In  all  discussions  of  this  kind  we  must 
understand  both  sides,  and  fair,  intelligent  Americans  want  to 
know  both  sides  of  the  question,  so  that  they  may  form  intel- 
ligent conclusions ;  and  it  is  only  right  and  proper.     Through 
the  daily  papers,  which  are  undoubtedly  the  best  medium  of  in- 
formation, we  have  learned  the  side  of  the  people.     The  other 
side,  which  concerns  the  trusts  themselves,  has  not  been  given, 
and  therefore  we  are  here  to-day  to  discuss  what  trusts  are  and 
their  relation  to  the  public  welfare.     The  very  fact  that  trust 
officials  have  not  given  their  views,  their  reasons  for  existence, 
does  not  necessarily  mean  that  trusts  should  be  condemned; 
but  rather  we  may  ascribe  the  omission  to  the  fact  that  trust 
officials  do  not  know,  nor  do  they  to-day  understand,  the  force 
of  public  opinion.     Now,  in  relation  to  the  information  we  get 
from  the  newspapers,  as  one  who  has  been  in  that  profession 
for  many  years,  who  knows  something  about  it,  and  who  is  in 
it  to-day,  I  wish  to  say  that  newspapers  are  not  giving  all  sides 
of  these  questions  to  the  public.    Newspapers  to-day  are  regu- 
lated by  the  business  office.    Formerly  the  editors  of  the  papers 
controlled  their  policy.     To-day,  if  an  article  appears  in  the 
paper,  and  by  reason  of  it  so  appearing  some  subscriber  sends 
in  a  stop  order,  that  fact  is  immediately  communicated  to  the 
business  office,  it  is  known  to  the  advertiser;  the  advertiser, 
therefore,  stops  his  advertisement,  and  the  paper,  as  a  conse- 
quence, is  losing  money.     Now,  this  brings  me  to  a  point  that 
I  met  with  a  few  days  ago  in  Cleveland,  that  I  have  seen  many 
and  many  a  time  throughout  the  country,  that  I  know  is  taking 
place  in  the  city  of  Chicago.     For  instance,  in  Cleveland,  as 
you  all  know,  there  is  quite  a  lively  political  battle  on.     The 
people  want  to  be  educated  on  that,  the  main  issue,  that  is  the 
street  car  question ;  and  yet  one  of  the  most  influential  papers 
there,  most  influential  in  its  news  columns,  has  positively  and 
absolutely  refused  to  publish  any  statement  favorable  to  the 
other  side.     Furthermore,  when  the  proposition  was  made  to 
put  the  statement  in  as  advertising  matter,  still  the  paper  re- 
fused to  give  in.     One  of  the  speakers  a  short  time  ago,  Mr. 
Bingham,  of  Indianapolis,  I  believe,  and  several  others  before 
him,  took  up  the  Standard  Oil  case,  the  twenty-nine-million- 
dollar  fine.     I  know  I  am  going  to  be  very  unpopular;  never- 
theless, I  have  never  been  afraid  of  unpopularity  at  any  time, 
nor  am  I  now.    I  want  to  say  to  you,  gentlemen,  that  if  all  the 
facts   in  the   case  of  the   Standard   Oil   Company  were  made 


known  to  you,  as  I  have  investigated  myself  and  know  what  I 
am  talking  about,  that  instead  of  being  found  guilty  the  Stand- 
ard Oil  Company  would  be  declared  innocent  and  persecuted. 
It  is  a  rather  laughable  thing  to  say,  but  this  question  is  a  part 
of  this  conference.  Several  months  ago  I  came  here  to  write 
it  up,  and  shortly  after  starting  to  look  up  the  records,  going 
through  all  the  stenographic  report  and  taking  days  to  do  it, 
my  work  led  me  to  the  conclusion  that  the  company  was  not 
getting  that  supposedly  square  deal. 

DR.  CHARLES  W.  NEEDHAM  (District  of  Columbia): 
Mr.  Chairman — When  I  came  here  I  did  not  expect  to  hear  a 
great  many  of  the  things  I  have  heard.  I  did  not  think  there 
was  so  much  rascality  in  the  country.  I  knew  there  was  some, 
but  I  did  not  believe  all  the  people  who  transacted  business  or 
had  an  interest  in  the  great  business  of  this  country  were  taint- 
ed. And  now  the  gentleman  who  has  just  taken  his  seat  has 
taken  that  great  vehicle  in  a  blanket  form,  the  newspapers, 
which  convey  to  us  a  great  deal  of  intelligence,  both  good  and 
bad,  that  they,  too,  are  tainted.  It  strikes  me  that  this  is  all 
far-fetched.  I  believe  in  the  great  heart  of  the  American  peo- 
ple, and  I  don't  believe  the  newspapers  of  this  country,  as  a 
class,  are  crooked,  and  I  don't  believe  that  of  the  business  men. 
I  believe  that  we  have  sufficient  law  upon  our  statute  books  at 
this  time,  however,  to  correct  evils  if  they  exist.  I  have  noticed 
in  all  the  papers  I  have  read  that  have  been  railing  at  the  cor- 
porations and  the  trusts,  doing  the  calamity  act,  that  one  im- 
portant part  of  the  Government  has  been  overlooked,  that  of 
the  Bureau  of  Corporations.  Mr.  Chairman,  if  I  understand  it 
correctly,  that  bureau,  aside  from  the  functions  of  the  Depart- 
ment of  Justice  or  that  branch  of  the  Government  presided  over 
by  the  Attorney-General,  has  power  to  cite  and  call  into  court, 
and  make  good,  if  you  please,  by  publicity  or  by  direction,  by 
suit,  by  fine  or  imprisonment,  corporations  who  have  evaded 
the  law  and  become  criminal.  And  it  struck  me  last  night., 
when  Mr.  Dawes  was  talking,  in  his  reference  to  the  anti-trust 
law  that  bears  the  name  of  Senator  Sherman,  he  said,  going 
on  to  describe  that  portion  of  a  crime :  "I  cannot  believe  that 
John  Sherman,  with  all  his  brilliancy,  and  the  men  who  were 
his  colleagues  in  the  lawmaking  body  at  that  time,  were  foolish 
enough  to  pass  a  law  that  did  not  furnish  the  remedy,  notwith- 
standing that  a  good  many  people  may  think  differentlv."  I 
believe  it  is  a  good  contention  to  set  up,  and  I  believe  it  will 

429 


stand,  that  in  the  making  of  the  law — if  it  is  a  law  to  penalize 
violation  by  fine  and  imprisonment — that  there  is  a  maximum 
as  well  as  a  minimum  penalty ;  and  if  there  is  any  clause  in  that 
law,  found  upon  indictment,  submitted  by  proof  to  a  jury  of 
sane  people,  if  that  restraint  was  for  the  benefit  of  the  common 
people  there  would  be  no  conviction. 

THE  CHAIRMAN:  I  notice  before  me  the  Hon.  Robert 
Taylor,  of  Richmond,  Indiana,  who  is  an  expert  on  this  sub- 
ject, and  I  know  you  will  all  be  glad  to  hear  from  Mr.  Taylor 
if  he  will  say  a  few  words. 

HON.  ROBERT  TAYLOR  (Indiana)  :  Mr.  Chairman— I  did 
not  expect  to  be  named,  as  they  say  about  a  member  ol  Par- 
liament who  is  reprimanded  by  the  Speaker.  I  did  have  one 
thought  in  my  mind  that  I  thought  I  would  like  to  express,  if 
I  could  do  it  in  five  minutes,  if  the  proper  time  came ;  but  there 
has  not  been  a  proper  time  yet.  However,  I  will  express  my 
thoughts,  proper  or  improper  time. 

The  labor  unions  are  essential  to  the  happiness,  prosperity 
and  perpetuity  of  this  country.  That  we  may  be  a  happy  and 
prosperous  people,  the  laboring  men,  the  working  men  of  the 
country  must  make  enough  to  live  comfortably — comfortably 
according  to  the  standard  of  to-day,  and  the  higher  standard 
of  to-morrow,  and  the  still  higher  standard  of  years  to  come. 
We  cannot  entrust  these  great  interests  to  the  employers  alone. 
The  working  men  must  depend  upon  their  organizations  to 
secure  justice  for  themselves  and  the  prosperity  of  the  com- 
munity. I  put  this  with  all  the  emphasis  that  I  can,  because  I 
am  just  going  to  say  something  on  the  other  side  of  the  ques- 
tion, and  I  do  not  want  it  to  be  forgotten  that  I  say  that  the 
working  men's  unions  of  this  country  are  essential  to  its  ex- 
istence and  its  prosperity.  On  the  other  hand,  the  conditions 
which  the  unions  have  brought  upon  us  is  one  of  war;  it  is 
social  war  between  capital  and  labor.  It  is  a  war  that  is  indis- 
pensable from  the  conditions  of  things.  We  tolerate  this  war 
because  we  realize,  whether  we  say  it  or  not — we  realize  that 
there  is  not  in  the  law  any  adequate  method  of  settling  these 
questions,  and  until  there  is  some  adequate  provision  by  law 
to  determine  these  questions,  we  must  let  the  parties  fight  it 
out.  There  is  no  other  way ;  but  society  must  keep  its  hand 
on  the  fight.  Society  must  see  to  it  that  the  war  does  not  be- 
come so  destructive   of  the   interests   of  society  that  it  is   no 

430 


longer  tolerable.  And  so,  I  say  we  can  no  more  afford  to 
give  over  to  the  labor  unions  control  of  all  questions  of  hours 
and  wages  and  all  that  than  we  can  to  the  employers.  So 
society  must  keep  a  restraining  hand  upon  these  controversies 
and  see  to  it  that  the  labor  unions  do  not  acquire  too  much 
power. 

I  have  this  illustration  in  my  mind  right  now,  because  it 
comes  right  home  to  us.  We  are  now  suffering  the  inconven- 
ience of  a  great  strike  of  telegraph  operators.  They  are  de- 
manding that  their  union  shall  be  recognized  by  their  employ- 
ers. Society  cannot  afford  to  let  that  demand  be  granted.  The 
country  cannot  afford  to  put  a  service  of  that  kind  into  the  un- 
controlled power  of  the  telegraphers'  union ;  and  so  I  say  that 
it  is  indispensable  for  the  country  that  that  strike  shall  fail,  so 
far  as  that  point  goes.  Our  friends  across  the  water,  in  Eng- 
land, are  to-day  greatly  disturbed  by  the  process  of  a  similar 
issue  between  the  trades  unions  there  and  the  railroads.  The 
control  of  the  business,  the  compelling  of  the  recognition  of  the 
union  everywhere  by  the  employer  is  the  end  to  which  the 
unions  have  been  striving  for  many  years,  and  it  is  natural  that 
they  should  do  so — perfectly  so.  The  railroad  employes  of 
England  are  attempting  to  form  a  union  so  strong  that  they 
shall  absolutely  control  that  business,  and  the  question  now  is 
whether  the  railways  shall  recognize  the  union  or  not.  The 
railways  are  standing  out  and  refusing  to  do  it,  and  refuse  to 
communicate  or  discuss  the  question  with  the  leaders  of  the 
workingmen's  union,  and  they  are  right.  That  point  cannot  be 
given  up.  The  war  must  go  on.  It  must  go  on,  and  on,  until 
we  come  to  a  point  where  we  are  wise  enough  and  considerate 
enough  to  formulate  some  provisions  of  law  by  which  these 
questions  can  be  settled  otherwise  than  by  wager  of  battle. 
And  when  a  strike  comes  on  I  say,  "Go  it!"  I  say,  "Hurrah  for 
both  sides."  I  say  to  the  strikers,  "Fight  out  your  battle ;  fight 
it  out  to  the  end  with  all  the  strength  you  have."  I  say  to  the 
employers,  "Stand  to  your  works  and  fight  on,  and  fight  on,  as 
long  as  you  can."  It  is  by  these  continued  struggles,  and  by 
this  method  alone,  that  we  shall  finally  come  to  the  point  where 
we  can  provide  sane  and  wise  laws  that  shall  control  these  sub- 
jects. That  was  my  thought,  and  that  is  all  there  is  of  it,  and 
I  want  to  throw  it  into  this  conference  as  a  fundamental  propo- 
sition that  fierce  labor  struggles  are  indispensable  to  progress 

43i 


along  the  lines  upon  which  we  must  make  progress  before  we 
come  to  a  condition  of  peace  and  prosperity. 

MR.  E.  GAEDZIK  (Secretary  Baldwin  Equipment  and  Sup- 
ply Company,  Chicago) :  Mr.  Chairman — When  a  labor  union, 
in  making  a  contract,  cannot  control  the  individual  and  make 
him  stick  to  the  contract  which  their  superiors  have  made,  I  do 
not  see  how  they  are  entitled  to  make  any  contract  at  all.  I 
do  not  believe  they  have  any  legal  standing  whatever,  and  they 
should  be  given  such  legal  standing  by  chartering  the  unions 
in  general.  I  have  a  resolution,  which  I  believe  it  is  now  too 
late  to  hand  in 

THE  CHAIRMAN:  The  resolution  committee  has  closed 
its  acceptance  of  resolutions.  They  were  called  for  this  morn- 
ing several  times,  and  I  am  afraid  it  will  be  too  late  to  put  it  in. 

A  DELEGATE:  Can  it  not  be  accomplished  by  unanimous 
consent? 

MR.  BESSETTE  (Chicago):  I  move  that  we  ask  for  unani- 
mous consent  to  allow  the  gentleman  to  present  the  resolution. 
This  will  come  out  in  debate  after  the  resolutions  are  presented, 
anyhow.  I  think  we  should  have,  a  chance  to  have  it  out  on 
the  floor  and  tell  each  other  what  we  think  of  each  other.  I 
would  like  to  see  it  come  up  before  the  resolutions  committee. 
It  is  part  and  parcel  of  this,  and  it  has  been  injected  into  every 
speech  I  have  heard  upon  the  floor. 

THE  CHAIRMAN:  Is  there  any  objection  to  the  gentle- 
man presenting  the  resolution?  There  being  no  objection,  the 
resolution  will  be  received. 

MR.  GAEDZIK:    I  will  now  present  the  resolution: 

Whereas,  The  trades  or  labor  union,  as  it  exists  to-day,  es- 
sentially and  materially  enters  into  the  successful  life  of  our 
manufactures,  commerce  and  business  at  large ;  and 

Whereas,  Its  legal  responsibility  and  standing  is  rather  un- 
defined ;  and 

Whereas,  It  is  justly  doubted  whether  this  combination,  as 
such,  can  effectively  control  the  individual  for  whom  it  enters 
into  a  contract;  and 

Whereas,  The  possibility  of  obtaining  legal  redress  or  pay- 

432 


ment  of  damages  for  overt  or  illegal  acts  from  such  bodies  is 
largely  problematical ;  and 

Whereas,  Its  extent  is  not  limited  by  State  boundary  lines ; 
and 

Whereas,  Great  havoc  and  damages  have  been  caused  by 
hasty  or  injudicious  actions  of  such  bodies,  and  possibilities  for 
great  disturbances  to  the  detriment  of  the  country  at  large  cer- 
tainly exist;  therefore  be  it 

Resolved,  That  Federal  control  be  extended  to  include  these 
combinations  known  as  ''trades"  or  "labor  unions"  at  least  to 
the  following  extent: 

i.  Charter  all  unions. 

2.  Cause  them  to  deposit  with  the  Commissioner  of  Labor 
a  guarantee  fund  of,  say,  $5  or  $10  per  capita  of  their  accred- 
ited membership,  from  which  all  finally  adjudicated  damages 
shall  be  paid,  and  to  pay  taxes  upon  such  guarantee  fund, 
thereby  putting  them  upon  an  equal  basis  with  the  employer,  at 
least  as  far  as  contracting  power  is  concerned. 

3.  Uphold  the  sanctity  of  the  contract,  and  eliminate,  as  dis- 
tinctly un-American,  all  coercion  as  to  the  union  alternative  of 
"either  become  a  member  or  quit  the  job." 

4.  Assess  them  with  a  small  percentage  of  their  wages  for 
the  purpose  of  maintaining  institutions  provided  for  taking  care 
of  the  sick  or  disabled  members  thereof. 

5.  Withdraw  charter  and  dissolve  offending  bodies. 

MR.  THOMAS  C.  SPELLING  (New  York)  :  Mr.  Chairman 
— I  don't  like  to  trespass  on  your  time,  in  addition  to  the  time  I 
took  upon  the  platform.  I  intended,  though,  to  suggest  the  feas- 
ibility and  the  necessity  for  a  conference  of  the  people  or  repre- 
sentatives of  the  States  or  organizations  to  consider  amend- 
ments to  the  Federal  Constitution.  You  all  noticed  the  evils 
of  trusts  and  monopolies,  to  which  attention  was  called  by  Mr. 
Kellogg,  of  the  Department  of  Justice ;  also  by  Judge  Gross- 
cup.  They  were  simply  enormous  and  deplorable.  The  evils 
of  trusts  and  monopolies  seem  to  have  been  entirely  lost  sight 
of  in  this  conference,  although  it  is  called  a  trust  conference. 
Now,  gentlemen,  I  desire  to  repeat  what  I  said  from  the  plat- 
form. There  is  no  power  in  Congress,  nor  can  Congress  ac- 
quire any  power  save  by  amendment  to  the  Constitution,  to 
curb,  or  even  regulate,  the  trusts  in  this  country,  as  they  are 
organized.  Judge  Grosscup  called  attention  to  the  fact  that 
when   the   Government  succeeded  in  crushing  and   regulating 

433 


trusts  in  one  form,  the  trusts  came  up  in  another  form.  One  of 
them  was  incorporated  in  New  Jersey  for  a  billion  dollars.  The 
thing  to  do — and  I  think  postponement  is  not  only  prejudicial 
but  fatal  to  the  welfare  of  the  people — the  thing  to  do  is  to 
amend  the  Federal  Constitution  and  give  the  Federal  Govern- 
ment more  power,  call  it  centralization  or  whatever  you  please. 
I  will  not  detain  you  further,  except  to  say  this :  I  intended 
to  suggest  the  propriety  and  the  desirability  of  the  National 
Civic  Federation  calling  another  conference  at  an  early  date 
to  consider  the  question  of  amending  the  Constitution,  and  I 
throw  out  this  suggestion.  That  is  a  matter  that  does  not  prop- 
erly belong  to  anybody  else.  That  step  ought  to  be  taken,  and 
I  would  like  you  gentlemen  to  seriously  consider  it  and  com- 
municate with  that  organization,  or,  if  you  cannot  do  any  bet- 
ter, communicate  with  me  at  New  York,  and  I  will  see  that  "the 
matter  is  laid  before  them. 

Upon    motion,    the    conference    adjourned    until    10   o'clock 
A.  M.,  Friday. 


434 


Ninth  Session,  Friday,  October  25,  i^oj. 

The  conference  was  called  to  order  by  Hon.  Seth  Low,  at 
10:15  A.  M.,  Friday. 

THE  CHAIRMAN:  The  subject  arranged  for  discussion 
this  morning  by  the  Committee  on  Arrangements  is  "The  Tariff 
and  the  Trusts."  At  11  o'clock  precisely  the  report  of  the  Com- 
mittee on  Resolutions  will  be  taken  up  for  consideration,  and 
a  vote  has  to  be  taken  upon  that  subject  by  12  o'clock.  It  has 
been  arranged,  therefore,  that  Mr.  Byron  W.  Holt,  of  the  Re- 
form Club,  will  speak  for  ten  minutes  on  the  free  trade  side ; 
Mr.  Wilbur  F.  Wakeman  will  then  reply  for  ten  minutes  or 
thereabouts  from  the  protective  side.  He  will  be  followed  by 
Mr.  Franklin  Pierce,  of  the  American  Free  Trade  League,  for 
ten  minutes,  and  M'r.  Wakeman  will  have  an  opportunity  to 
reply  for  ten  minutes.  That  divides  forty  minutes  available  to 
the  two  sides.  The  chair  understands  that  the  debate  is  not 
between  protection  and  free  trade  as  a  general  or  economic 
proposition,  but  it  is  the  effect  of  the  tariff  on  trusts  and  com- 
binations which  is  the  subject  matter  of  this  conference.  I  have 
now  very  great  pleasure  in  presenting  Mr.  Byron  W.  Holt,  of 
the  Reform  Club,  who  will  speak  on  the  question,  "Is  the  Tariff 
the  Mother  of  Trusts?" 

Mr.  Byron  W.  Holt. 

Mr.  Chairman — Is  the  Tariff  the  mother  of  trusts?  No;  mo- 
nopoly is.  Is  the  Tariff  a  mother  of  trusts  ?  Yes ;  a  most  pro- 
lific mother.  Besides,  it  is  a  foster  mother  of  nearly  all  of  the 
trusts  of  which  it  is  not  the  real  mother.  The  home  market 
monopoly,  created  by  our  present  outrageously  high  Dingley 
tariff,  has  clearly  given  birth  to  and  nourished  and  protected 
more  vicious  and  monstrous  trusts  than  have  all  other  forms  of 
monopoly  in  this  country.  The  world  never  before  saw  so  many 
huge,  thieving,  preying  combinations  as  are  now  with  us. 

The  arguments  and  evidence  in  support  of  these  statements 

435 


are  so  strong  and  overwhelming  that  it  ought  not  to  be  neces- 
sary to  repeat  them  to  an  intelligent  audience.  I  shall  briefly 
enumerate  some  of  them  : 

PROTECTION  INVITES  TRUSTS. 

1.  A  protective  tariff  tends  to  restrict  competition  to  the 
country  protected.  It  stands  to  reason  that  it  is  easier  to  form 
a  national  than  an  international,  or  world,  trust. 

2.  Protected  countries  have  many  trusts ;  free  trade  countries 
virtually  none. 

3.  The  number,  size  and  effectiveness  of  the  trusts  in  different 
countries  varies,  roughly,  with  the  amount  of  protection  af- 
forded by  tariff  duties. 

4.  The  era  of  trusts  began  in  this  country  with  the  passage 
of  the  Dingley  bill — the  culmination  of  protection  run  mad. 

5.  No  trust  of  consequence  was  formed  under  the  relatively 
low  protective  tariff  act  called  the  Wilson  bill. 

The  first  proposition  is  axiomatic.  It  is  clear  that  a  tariff 
which  keeps  out  foreign  goods,  and  thus  restricts  the  field  of 
competition,  not  only  invites,  encourages  and  promotes  the 
formation  of  industrial  combinations,  but  fosters  and  protects 
them,  after  they  are  formed,  and  aids  them  in  controlling 
prices.  The  smaller  the  territory  circumscribed  by  a  tariff  wall 
the  more  likely  it  is  that  the  competitors  in  an  industry,  inside 
this  wall,  will  get  together  to  control  production  and  prices, 
within  the  wall,  however  free  they  leave  themselves  to  cut  prices 
in  outside  territory. 

Fortunately  for  us,  we  do  not  have  tariff  walls  around  States, 
counties  or  cities.  The  rates  of  duty  of  the  Dingley  bill  would 
be  unbearable  and  would  not  be  tolerated  by  the  most  patient 
people  on  earth,  if  applied  to  a  very  small  country  or  to  a  single 
State.  Under  such  conditions,  our  States  would  be  overrun 
with  trusts  even  more  than  they  now  are,  and  the  sum  total  of 
the  tariff  graft,  instead  of  being  $1,500,000,000  a  year,  as  now, 
would  be  two  or  three  times  as  much.  However,  this  country 
would  not  have  attained  its  present  great  population  and  wealth 
had  each  of  our  States  been  surrounded  by  Dingley  tariff  walls. 
Its  prosperity  is  largely  due  to  the  fact  that,  considering  its  in- 
ternal commerce,  it  is  the  greatest  free  trade  country  on  earth. 

The  second  and  third  propositions  are  based  on  facts.  Un- 
questionably there  are  more  and  stronger  trusts  in  protected 

436 


than  in  free  trade  countries ;  in  countries  of  high  than  in  those 
of  moderate  protective  duties. 

Congressman  Littlefield,  of  Maine,  a  stanch  Republican  and 
protectionist,  published,  in  1903,  in  the  Congressional  Record,  a 
list  of  793  trusts  with  a  total  capitalization  of  $14,000,000,000. 
Of  these  trusts  435,  with  over  $9,000,000,000  of  capital,  were 
industrial  combinations.  Nothing  like  this  number  of  trusts  has 
ever  been  found  in  any  other  country. 

BUT  FEW  TRUSTS  IN  ENGLAND. 

The  Industrial  Commission,  a  Republican,  partisan  protec- 
tionist body  of  the  most  pronounced  type,  sent  Professor  J.  W. 
Jenks  to  Europe  to  find  as  many  trusts  there  as  possible.  He 
found  thirty-five  so-called  trusts  in  England,  with  a  total  capital  of 
$460,000,000,  or  less  than  one-third  that  of  our  pet  steel  trust. 
He  quoted  tables  from  Liefman's  book  showing  that  there  had 
been  345  trusts  in  Germany,  and  that  from  230  to  250  were  in 
existence  there  in  1897.  He  stated  that  "in  England  the  move- 
ment toward  combination  has  not  gone  so  far  as  in  either 
Austria  or  Germany" — both  highly  protected  countries.  He 
stated  that  the  English  trusts  have  but  little  water  in  their  capi- 
talization as  compared  with  American  trusts;  that  the  English 
trusts  have  had  little  or  no  effect  in  advancing  prices,  and  that 
the  (then)  recent  slight  advance  in  prices  was  "due  in  good  part 
to  the  increase  in  the  prices  of  the  raw  materials."  In  Germany 
he  found  that  many  of  the  trusts,  taking  advantage  of  the  high 
tariff  duties,  had  advanced  prices  very  much.  This  was  particu- 
larly true  of  the  iron  and  steel  trusts  and  of  the  sugar  trust,  or 
cartel,  both  of  which  pattern  after  our  much  larger  trusts  and 
sell  goods  for  export  much  below  the  home  prices. 

Other  writers  fmd  even  fewer  trusts  in  England  than  did  Pro- 
fessor Tenks.  Mr.  Wilhelm  Berdrow,  a  German  Economist, 
says  in  the  May,  1899,  Forum: 

"As  far  as  England  is  concerned,  it  must  be  admitted  that 
the  trust  system  has  as  yet  found  but  tardy  acceptance  in  that 
country.  This  is  doubtless  due  in  some  degree  to  the  thorough 
appreciation  of  the  principle  of  free  trade;  for  it  is  well  known 
that  the  largest  trusts  are  powerless  unless  their  interests  are 
secured  by  a  protective  tariff  excluding  from  the  whole  market 
the  product  of  foreign  countries." 

Mr.  Thomas  Scanlon,  of  Liverpool,  writing  of  trusts  in 
England,  said: 

437 


"It  cannot  be  said  that  we  suffer  in  any  appreciable  degree 
from  combinations  of  producers  to  keep  up  prices." 

These  and  other  authorities  virtually  agree  that,  instead  of 
the  price-raising,  congress-controlling,  law-defying,  bulldozing 
and  all-powerful  tariff  monsters  with  which  we  are  familiar  in 
this  country,  the  so-called  trusts  of  England  are  really  only 
harmless  syndicates,  with  little  or  no  control  over  prices.  They 
exist  not  because  they  have  any  monopoly,  but  because  produc- 
tion can  be  carried  on  more  economically  on  a  large  than  on  a 
small  scale.  If  they  attempt  to  control  prices,  as  did  the  re- 
cently formed  soap  trust,  they  commit  what,  in  England,  is 
regarded  as  the  unpardonable  sin.  The  soap  trust  endured  but 
a  few  short  weeks.  A  really  free  people  would  not  stand,  for  one 
month,  the  robbery  of  any  one  of  our  scores  of  plundering, 
tariff  trusts. 

The  testimony  is  overwhelming  that  trusts  do  not  flourish  in 
free-trade  England  as  they  do  in  protected  Austria,  Germany 
and  the  United  States.  Nowhere,  outside  of  the  Republican 
Campaign  Book  and  of  the  organs  of  protection,  published  by 
the  organizations  supported  by  the  protected  interests,  is  it  even 
pretended  that  England  has  trusts  comparable  to  those  in  this 
country.  These  organs  brazenly  disregard  and  defy  all  known 
facts.    Thus  the  Republican  Text  Book  of  1900  said: 

"England  has  no  tariff,  and  trusts  exist  and  flourish  in  free- 
trade  England — trusts  more  monstrous  than  any  that  we  know 
anything  about." 

These  monstrous  trusts,  it  was  said,  "are  solely,  thoroughly 
and  absolutely  the  product  of  Cobdenite  Free  Trade." 

The  American  Economist,  organ  of  the  Protective  Tariff 
League,  on  October  18,  1907,  says: 

"Former  Governor  Douglas  says  the  only  way  to  save  this 
country  from  the  trusts  is  to  cut  down  the  tariff.  Douglas 
would  have  a  terrible  time  telling  the  British  people  how  they 
were  to  get  out  of  the  clutches  of  the  trusts.  They  are  in  the 
clutches  more  than  the  people  of  the  United  States,  and  they  have 
no  tariff  to  cut  down." 

I  hesitate  to  say  that  the  writers  of  these  statements  knew 
them  to  be  false  and  that  they  deliberately  distort  and  falsify 
facts  and  figures  in  order  to  deceive  the  voters  and  to  prolong 
our  accursed  tariff  system.  I  prefer  to  credit  such  misrepre- 
sentations to  the  overzealous  efforts  of  protection  fanatics  who 

438 


honestly  believe  that  foreign  trade  and  commerce  is  a  curse  and 
who  would  like  to  see  each  country  surrounded  by  walls  of  fire. 

DINGLEY  BILL  USHERED  IN  'ERA  OF  TRUSTS. 

While  the  truth  of  proposition  four  is  well  established  by 
facts,  it  is  also  true  that  a  few  of  our  important  trusts  were 
formed  under  the  auspices  of  the  McKinley  bill  of  1890;  three 
or  four  even  antedating  1890. 

Census  Bulletin  No.  22,  issued,  I  believe,  in  1900,  contained 
information  concerning  183  "industrial  combinations,"  as  they 
were  modestly  called,  with  a  total  authorized  capital  of  $3,607,' 
539,200.  Of  these  183  trusts,  7  were  formed  in  1897,  20  in  1898, 
79  in  1899  and  13  in  1900,  prior  to  June  30.  Nearly  two-thirds 
of  these  trusts  were,  therefore,  formed  in  the  three  years  follow- 
ing the  passage  of  the  Dingley  act. 

Mr.  John  Moody's,  "The  Truth  About  the  Trusts,"  was  pub- 
lished in  March,  1904.  It  contains  a  list  of  318  important  active, 
industrial  trusts  with  a  total  outstanding  capital  of  $7,246,- 
342,533.  Of  these  318  trusts,  236,  with  a  capitalization  of 
$6,049,618,223,  were  formed  since  January,  1898.  It  thus  ap- 
pears that  about  three-fourths  of  the  important  trusts,  in  1904, 
were  formed  since  the  passage  of  the  Dingley  bill  and  that  the 
capitalization  of  these  trusts  was  more  than  five-sixths  of  the 
total  capitalization  of  all  trusts. 

NO  IMPORTANT  TRUSTS  UNDER  WILSON  BILL. 

Only  fourteen  of  these  trusts  were  formed  while  the  Wilson 
bill  was  in  force.  Of  these  fourteen,  two  were  formed  before 
and  were  only  reorganized  during  the  Wilson  bill  period.  One, 
the  Borax  Consolidated,  Limited,  was  incorporated  in  England, 
and  was  the  outgrowth  of  a  most  obnoxious  American  trust, 
born  in  1890,  I  believe.  Another,  the  Consolidated  Lake  Su- 
perior Company,  was  named  in  1897,  but  did  not  really  become 
a  trust  until  1901.  There  were,  then,  really  but  ten  trusts,  with 
a  total  capital  of  only  $108,150,000,  that  can  properly  be  credited 
to  the  Wilson  bill  period.  Of  these  ten  trusts  The  Virginia- 
Carolina  Chemical  Company,  capitalized  at  $57,000,000,  has 
since  been  reorganized.  The  remaining  nine,  having  a  capi- 
talization of  only  $51,150,000,  include  several  patent  combina- 
tions and  the  Pure  Oil  Company,  one  of  the  most  successful 
competitors  of  the  Standard  Oil  Company. 

439 


The  Wilson  bill,  then,  was  not  the  mother  of  a  single  success- 
ful trust  of  any  consequence.  This  is  a  rather  remarkable  fact 
when  it  is  considered  that  the  Wilson  bill  rates  were  only 
slightly  lower  than  those  of  the  McKinley  and  Dingley  bills.  Its 
duties  were,  however,  much  less  protective  than  those  of  the 
other  bills.  From  these  facts  we  may  infer  that  moderate  pro- 
tection will  not  give  birth  to  many  important  trusts  and  that 
inordinate  protection  is  necessary  to  overcome  the  natural 
tendency  of  individual  manufacturers  to  hang  on  to  the  busi- 
nesses which  they  have  built  up.  These  facts  are  also  suggestive 
to  some  of  our  mighty  statesmen  who  are  vainly  trying  to 
"bust"  trusts  by  court  proceedings,  and  without  taking  away 
from  them  the  special  tariff  privilege  which  nourishes  and  sus- 
tains them.  It  is  as  if  our  nation  should  try  to  prevent  drunk- 
enness and  its  many  evils  by  legislative  enactments,  while  main- 
taining public  saloons  for  the  free  distribution  of  whiskey  and 
other  alcoholic  drinks. 

It  being,  then,  established  that  our  Dingley  tariff  breeds  trusts 
as  naturally  as  a  tropical  swamp  breeds  mosquitoes,  we  are  ready 
to  consider  another  phase  of  the  tariff-trust  question. 

TARIFFS,  TRUSTS  AND  PRICES. 

Not  only  did  the  Dingley  act  usher  in  an  era  of  trusts,  but  it 
also  ushered  in  an  era  of  high  prices.  Professedly,  a  trust  is 
formed  to  reduce  the  cost  of  production  and  to  establish  and 
maintain  fair  and  stable  prices.  Actually,  most  trusts  are  formed 
to  create  a  monopoly,  to  put  prices  as  high  as  possible,  to  reduce 
wages,  and,  in  general,  to  make  profits. 

The  trust  promoters  "got  busy"  almost  before  the  Dingley 
bill  was  signed  by  President  McKinley.  They  made  hay  while 
the  tariff  sun  was  shining;  they  are  still  in  the  harvest  field, 
though  the  hay  is  nearly  all  garnered — nearly  every  article  of 
necessity,  except  farm  products,  being  the  product  of  some  pro- 
tected trust  that  fixes  prices  at  the  maximum  profit  point.  The 
trusts  lost  no  time  in  elevating  prices — some  25  per  cent,  some 
50  per  cent  and  some  100  per  cent.  The  price  of  wire  nails  was 
yanked  up  from  $1.40  per  keg,  in  July,  1898,  to  $2.45,  in  July, 
1899,  and  to  $3.30,  in  January,  1900.  The  price  of  barb  wire  was 
pulled  up  from  $1.80  per  hundred  pounds,  in  July,  1898,  to 
$3.30,  in  July,  1899,  and  to  $4.13,  in  January,  1900.  It  having 
become  evident  to  the  presiding  genius  then  at  the  head  of  the 

440 


American  Steel  and  Wire  Company  that  prices  were  so  high 
that  they  were  checking  consumption,  he  promptly  and  pre- 
cipitately lowered  prices  of  wire  and  nails  one  cent  a  pound. 
The  price  of  tin  plate  was  lifted  from  $2.85  per  hundred  pounds, 
in  July,  1898,  to  $4.05,  in  July,  1899,  and  to  $4.84,  in  January. 
1900.  The  price  of  steel  beams  was  raised  from  $1.20,  in  1897, 
to  $2.40,  in  1900.  The  price  of  plate  glass  rose  150  per  cent  from 
1897  to  1900.  The  price  of  window  glass  was  shoved  up  from 
$1.75,  in  April,  1897,  to  $4.80,  in  April,  1901.  Similar  advances 
were  made  in  the  prices  of  most  of  the  other  iron  and  steel 
products,  lead,  borax  and  of  many  other  articles. 

Since  1897,  and  especially  since  1899,  the  prices  of  trust 
products  have  been  maintained  at  extremely  high  points.  Be- 
cause of  excellent  crops,  sold  at  good  prices,  this  country  has 
been  prosperous  since  1897.  But  the  protected  trusts  have 
skimmed  the  cream  of  our  prosperity  and  have  left  only  the 
skimmed  milk  for  workingmen  and  farmers.  Money  wages 
have  risen,  but  tardily  and  slowly,  and  only  about  half  as  much 
as  has  the  cost  of  living.  The  prices  of  farm  products,  until  this 
year,  had  risen  less  than  had  the  prices  of  most  manufactured 
goods. 

The  average  rise  of  prices  is  best  shown  by  Dun's  index 
numbers.  These  include  the  prices  of  350  commodities  and  give 
each  a  weight  in  accordance  with  its  importance  in  consumption. 
On  July  1,  1897,  Dun's  index  number  was  72,455;  on  March  1, 
1907,  it  was  109,9,13,  showing  an  advance  in  average  prices 
since  1897  of  51.7  per  cent.  By  April  1,  1907,  there  had  been 
a  decline  of  about  2  per  cent.  For  some  reason,  Dun's  figures, 
which  until  then  had  been  published  regularly  for  thirty  years, 
have  not  been  published  since  April.  It  will  be  recalled  that, 
because  of  the  cold  Spring,  the  prices  of  cotton,  wheat,  corn, 
oats,  etc.,  rose  rapidly  during  April.  Possibly  there  was  some 
connection  between  these  two  facts.  Possibly  the  publication 
of  these  cost-of-living  figures  was  "accelerating  public  senti- 
ment" in  the  wrong  direction — for  the  trusts.  It  is  worth 
noting  that  one  year  previously  the  Department  of  Commerce 
and  Labor,  at  Washington,  suddenly  ceased  to  publish  Dun's 
tell-tale  figures  in  its  monthly  reports.  There  was  considerable 
of  a  "spread"  between  Dun's  and  the  Government's  figures  of 
prices,  and  the  spread  was  growing  rapidly.  These  coincidences 
may  have  had  nothing  to  do  with  the  stoppage  of  the  most 

441 


scientifically  constructed  cost-of-living  figures  ever  published. 
Regardless  of  economic  or  political  consequences,  we  earnestly 
hope  that  Dun's  Review  will  soon  continue  to  give  the  world 
the  benefit  of  its  price  tables. 

Bradstreet's  less  scientifically  constructed  figures  show  an  in- 
crease in  wholesale  prices  of  56  per  cent  from  July  1,  1898, 
to  March  1,  1907.  The  figures  of  the  Labor  Bureau  at  Wash- 
ington show  that  wholesale  prices  averaged  40.6  per  cent  higher 
in  1906  than  in  1897.  They  show  that  retail  prices  of  food 
averaged  15.7  per  cent  higher,  in  1906  than  for  the  ten  years 
from  1890  to  1899.  These  government  figures  are  very  un- 
satisfactory and  are  evidently  made  to  order.  Almost  any  kind, 
and  almost  all  kinds;  of  retail  prices  can  be  obtained,  even  on 
different  streets  of  the  same  city.  They  afford  excellent  oppor- 
tunities for  trick  juggling.  It  is  fair  to  assume  that  these  oppor- 
tunities have  been  utilized.  We  know  that  the  statistics  of  the 
census,  so  far  as  they  relate  to  wages  and  manufactures — 
especially  in  the  protected  industries — are  juggled  so  that  they 
are  almost  worthless. 

It  is  reasonably  certain  that  the  price  level  in  this  country 
is  now  between  50  per  cent  and  60  per  cent  higher  than  it  was 
ten  years  ago.  It  is  not  pretended  that  all  of  this  advance 
should  be  credited  to  the  Dingley  tariff  and  its  brood  of  trusts. 
The  Labor  Bureau  report  of  last  Spring  suggested  that  "in- 
ternal revenue  and  tariff  acts  have  in  a  marked  degree  affected 
prices  by  helping  them  to  move  upward."  This  is  undoubtedly 
true.  About  how  much  of  the  advance  should  be  credited  to 
the  tariff  and  trusts  can  be  learned  from  a  comparison  of  our 
price  figures  with  those  of  England,  where  there  are  no  pro- 
tective duties  and  no  tariff  trusts. 

Sauerbeck's  index  numbers  advanced  35.1  per  cent  from 
July,  1896,  to  March.  1907 — from  59.2  per  cent  to  80  per  cent. 
The  index  number  of  the  London  Economist  advanced  37.6  per 
cent  from  the  end  of  1897  to  March,  1907.  Since  March  last  it 
has  declined  rapidly  and  is  now  only  30  per  cent  higher  than  in 
1897.     Its  figures   in  1897   were  1,890,  and  on  October  1,  1907, 

2457; 

It  is  evident  from  these  figures  that  during  the  last  ten  years 
prices  have  risen  about  55  per  cent  in  this  country  and  35  per 
cent  in  England.  The  35  per  cent  advance  is  undoubtedly  due 
to  the  depreciation  of  gold.    A  similar  advance  has  occurred  in 

442 


all  countries.  The  greater  advance  in  this  country,  Canada  and 
Japan  can  fairly  be  credited  to  the  higher  tariffs  of  these  coun- 
tires  and  to  the  protected  trusts. 

AMOUNT  OF  TARIFF  GRAFT. 

To  be  perfectly  safe,  suppose  we  credit  only  15  per  cent  of 
this  rise  in  prices  to  our  tariff  and  tariff  trusts.  What  an  awful 
charge  against  them  !  We  probably  consume  about  $14,000,- 
000,000  worth  of  goods  in  a  year.  Fifteen  per  cent  of  $14,000,- 
000,000  is  $2,100,000,000 — the  amount  of  the  tariff-trust  graft. 
Estimated  in  other  ways,  and  especially  by  considering  the  tariff 
duties  on  each  item  and  the  difference  between  foreign  and 
domestic  prices,  it  appears  that  the  tariff  graft  is  fully 
$1,500,000,000. 

This  graft  is  far  greater  than  any  possible  graft  from  railroad 
rebates  or  overcharges,  of  which  we  have  heard  so  much  lately. 
It  is  almost  equal  to  the  total  gross  receipts  of  all  of  our  rail- 
roads— slightly  more  than  $2,000,000,000.  It  is  more  than  twice 
the  net  earnings  of  all  of  our  railroads. 

It  is  this  tariff-trust  graft  that  is  most  largely  responsible  for 
the  swollen  fortunes  that  have  caused  our  President  such  grave 
concern.  He  suggests  inheritance  taxes  to  lessen  somewhat 
the  rapidity  of  the  growth  of  these  tariff  swellings.  How  incon- 
sistent !  If  he  wants  not  only  to  stop  the  growth  of  but  to  re- 
duce these  abnoxious  swellings  why  does  he  not  try  to  stop  the 
cause  of  the  swellings?  Why  does  he  not  attack  the  tariff  walls 
behind  which  the  trusts  and  the  predatory  wealth  are  en- 
trenched? Are  our  tariff  schedules  sacred?  Is  there  any  other 
way  to  "bust"  the  trusts  so  that  they  will  stay  "busted,"  than 
to  "bust"  the  tariff  schedules  that  shelter  the  trusts?  What 
does  it  benefit  the  common  people  to  have  a  trust  illegalized  if 
its  products  are  sold  at  higher  prices  after  it  is  under  the  ban 
of  our  courts?  If,  by  high  tariff  duties,  we  license  the  trusts  to 
prey  upon  us,  can  we  hope  to  stop  their  depredations  by  the 
warning  fingers  of  our  courts?  If  we  turn  the  hogs  into  the 
garden  can  we  expect  them  to  refrain  from  eating  the  good 
things  there?  Is  it  not  clear  that  the  real  remedy  for  trusts  is  to 
cut  the  tap  root  from  which  they  derive  nourishment — the  tariff? 
Is  any  other  remedy  half  as  easy  to  give  or  half  as  certain  in  its 
results? 

Take  the  greatest  of  all  trusts — the  United  States  Steel  Cor- 

443 


poration !  It  is  as  clearly  a  trust  and  as  clearly  illegal  as  was  the 
Standard  Oil  Trust  when  it  was  declared  illegal.  But  does  any 
one  suppose  that  the  Steel  Trust  would  pay  any  more  attention 
to  court  decisions — so  far  as  prices  are  concerned — than  did  the 
Standard  Oil  Irust?  The  tariff  graft  of  the  Steel  Trust  is 
between  $50,000,000  and  $100,000,000  a  year.  To-day  it  holds 
the  keys  to  the  tariff  situation  at  Washington.  It  controls  the 
Finance  Committee  of  the  Senate  and  the  Ways  and  Means  and 
Rules  committees  of  the  House.  It  lets  nothing  get  by  it  in  the 
tariff  line.  It  is  the  chief  of  stand-patters — at  $75,000,000  a 
year.  It  will  not  give  up  its  tariff  keys  without  a  desperate 
struggle.  Those  who  think  otherwise  do  not  know  the  tariff  sit- 
uation at  Washington  and  do  not  appreciate  the  power  of  the 
billion-dollar  tariff-trust  graft. 

Other  trusts  have  been  "knocked  out"  by  our  courts,  but  are 
still  doing  business  at  the  old  stands  and  are  charging  higher 
prices  than  ever.  Some  of  these  are  the  sugar,  beef,  coal,  pipe 
and  paper  trusts.  What  do  these  trusts  care  for  court  decisions? 
In  no  instance  have  the  consumers  benefited  by  anti-trust  action. 
Why  is  the  farce  continued?  Is  it  to  throw  voters  off  the  trail? 
Why  not  cease  barking  up  the  wrong  tree?  The  real  remedy 
for  most  trusts  lies  in  the  removal  of  the  tariff  that  protects 
them.  This  action  will  not  injure  the  good  trusts — those  that 
produce  cheaply,  sell  at  fair  prices  and  charge  Americans  no 
more  than  foreigners  for  their  goods.  It  will,  however,  cure 
most  of  the  evils  of  big  industrial  combinations.  It  will  stop 
them  from  fattening  on  the  life  blood  of  the  nation. 

TARIFF    CONTRACT   VIOLATED. 

It  is  not  generally  known  that  protective  tariff  laws  got  on 
our  statute  books  through  false  pretences.  They  were  put  there 
with  an  understanding,  amounting  to  an  implied  contract,  that 
they  would  be  removed  should  the  protected  interests  at  any 
time  combine  to  stifle  competition  and  to  put  up  prices  above 
a  reasonable  basis.  Here  is  what  Senator  John  Sherman  said 
in  1899: 

"The  primary  object  of  a  protective  tariff  is  to  secure  the 
fullest  competition  by  individuals  and  corporations  in  domestic 
production.  If  such  individuals  or  corporations  combine  to 
advance  the  price  of  the  domestic  product,  and  to  prevent  the 
free  result  of  open  and  fair  competition,  I  would,  without  a 

444 


moment's  hesitation,  reduce  the  duties  of  foreign  goods  com- 
peting with  them  in  order  to  break  down  the  combination." 

Mr.  Blaine,  in  his  ''Twenty  Years  of  Congress,"  says : 

"Protection  in  the  perfection  of  its  design  does  not  invite 
competition  from  abroad,  but  is  based  on  the  contrary  principle 
that  competition  at  home  will  always  prevent  monopoly  on  the 
part  of  the  capitalists,  assure  good  wages  to  the  laboring  man 
and  defend  the  consumers  against  the  evil  of  extortion." 

Mr.  Andrew  Carnegie  is  quoted,  in  the  American  Manu- 
facturer, of  Pittsburg,  under  date  of  July  25,  1884,  as  saying : 

"We  are  the  creatures  of  the  tariff,  and  if  ever  the  steel 
manufacturers  here  attempt  to  control  or  have  any  general  un- 
derstanding among  them  the  tariff  would  not  exist  one  session 
of  Congress.  The  theory  of  protection  is  that  home  competition 
will  soon  reduce  the  price  of  the  product  so  it  will  yield  only  the 
usual  profit;  any  understanding  among  us  would  simply  attempt 
to  defeat  this.  There  never  has  been  nor  ever  will  be  such  an 
understanding." 

Notwithstanding  the  statements  of  these  eminent  protection- 
ists, the  protected  interests  have  taken  full  advantage  of  their 
tariff  monopoly  privileges  and  have  combined  and  put  up  prices. 
Moreover,  the  tariff  has  existed  through  several  sessions  of 
Congress  since  these  trust  conditions  have  been  known.  The 
protected  interests  have  broken  their  contracts.  Why  has  the 
tariff  not  been  taken  away  from  them?  When  will  Congress 
do  its  duty?  When  will  it  protect  the  people  in  the  only  way 
that  they  can  be  protected  from  the  protected  trusts? 

THE  CHAIRMAN :  We  will  now  hear  from  Mr.  Wilbur  F. 
Wakeman,  representing  the  American  Protective  Tariff  League. 
Mr.  Wilbur  F.  Wakeman. 

Mr.  Chairman — I  have  never  heretofore  had  the  pleasure  of  be- 
ing introduced  by  the  former  president  of  Columbia  University, 
one  of  the  greatest  factors  in  education  in  this  country,  the  great- 
est and  best  Mayor  any  city  has  ever  had,  Hon.  Seth  Low.  I  shall 
have  to  epitomize  what  I  want  to  say.  I  have  the  honor  of  a 
rejoinder  by  a  very  able  man,  Mr.  Franklin  Pierce,  and  I  will 
only  now  define  my  position,  except  in  one  thing.  I  was  out 
there  in  the  wings  and  heard  the  first  speaker  say  that  the  tariff 
is  the  mother  of  trusts.  I  think  every  man  before  me  will  re- 
member that  Mr.  Havemeyer  said  the  same  thing.  The  father  of 
the  Sugar  Trust  said  the  tariff  is  the  mother  of  trusts  and  was 

445 


organized  under  a  free  trade  period.  Right  in  that  line  of 
thought  I  want  to  call  attention  to  a  little  trust  that  came  to  my 
attention  a  short  time  ago  regarding  plate  glass,  wherein  the 
fellows  on  the  other  side  met  in  Paris  on  the  first  of  the  month 
and  the  next  month  in  Berlin,  the  next  in  Berne  and  the  next  in 
London  and  regulated  the  prices  for  the  Continent  The  pre- 
ceding speaker  did  not  refer  to  that.  We  have  trusts  here  and 
we  have  trusts  in  other  countries.  As  I  said,  I  first  want  to 
define  my  position.  Now  I  think  that  is  the  only  point  that  I 
care  to  refer  to  in  the  remarks  of  my  predecessor.  I  am  a  pro- 
tectionist, first,  last  and  all  the  time,  and  I  believe  that  protection 
is  the  keystone  of  patriotism.  Patriotism  means  the  love  of 
country,  but  patriotism  must  be  coupled  with  your  love  of  your 
fellow  man,  and  love  of  your  fellow  man  means  employment. 
Protection  furnishes  the  job.  Now  let  us  start  right —  and  this 
is  all  I  am  going  to  say  at  this  moment.  First,  what  is  a  tariff 
in  international  commerce?  It  is  a  tax.  It  is  a  tax  collected 
upon  merchandise  entering  one  country  from  another  country. 
To  illustrate,  the  American  tariff  on  lithograph  prints — and 
here  in  Chicago  you  are  one  of  the  greatest  producers  of  them — 
from  any  nation  in  the  world  to  this  country  is  twenty  cents  a 
pound.  Again,  the  tariff  on  tea  in  Great  Britain  is  ten  cents  a 
pound.  That  is  a  fair  statement.  That  is  the  tariff,  isn't  it? 
Second,  what  is  a  protective  tariff,  with  direct  reference  to 
American  practice?  A  protective  tariff,  according  to  my  under- 
standing, is  a  duty  or  a  tax  or  a  tariff  collected  upon  foreign 
merchandise  entering  the  United  States,  equal  to  the  difference 
in  cost,  of  production,  plus  a  reasonable  profit.  Is  that  right? 
To  illustrate :  Suppose  it  cost  ioo,  as  a  matter  of  illustration,  to 
produce  a  given  article  in  a  foreign  country,  and  it  costs  150 
here.  I  should  say  then  the  duty  ought  to  be  55  per  cent.  That 
illustrates  my  idea  of  protective  tariff.  Then,  what  is  free  trade 
or  revenue  tariff?  No  civilized  nation  practices  absolute  free 
trade.  Am  I  right?  Which  would  mean  no  duties,  no  taxes,  no 
tariff  on  merchandise  entering  one  country  from  another.  Great 
Britain  has  a  revenue  tariff  which,  in  my  judgment,  should  be 
called  a  free  trade  tariff.  Great  Britain  collects  duties,  or  a  tariff, 
upon  non-competitive  products,  and  perhaps  you  will  be  sur- 
prised when  I  tell  you  that  the  per  capita  collection  of  duties  in 
Great  Britain  is  greater  than  in  the  United  States.  If  I  am 
wrong  I  stand  ready  to  be  corrected.    Last  year  in  Great  Britain 

446 


tariff  duties  were  collected  by  eighty-two  cents  per  capita  more 
than  in  the  United  States.  Now,  you  have  your  definition  of  the 
free  trade  proposition. 

We  have  had,  during  the  last  eleven  years,  a  protective 
tariff,  and  what  has  happened?  The  greatest  prosperity  in  the 
world.  What  has  happened?  Savings  bank  deposits,  practically 
stationary  from  1893  to  1896,  $1,750,000,000;  and  what  has  hap- 
pened during  these  few  short  years  ?  That  has  increased  to  over 
four  billions  of  dollars.  Reconcile  that  proposition  with  the  re- 
marks which  have  preceded  me. 

THE  CHAIRMAN:  Mr.  Franklin  Pierce  is  the  next  speaker. 
Mr.  Franklin  Pierce. 

Mr.  Chairman — It  seems  to  me  that  it  will  be  necessary  to  re- 
turn to  the  question,  for  I  have  not  come  here,  although  I  may  be 
able  to  discuss  the  general  question  of  the  tariff,  with  any  other 
intent  than  to  discuss  the  question  whether  the  tariff  is  the  mother 
of  the  trusts.  Now,  I  say  that  the  essence  of  a  tariff  is  to  limit 
production  to  a  certain  area,  your  own  country,  for  instance ;  that 
the  essence  of  a  trust  is  to  reduce  the  number  of  persons  manufac- 
turing a  product.  Let  us  see.  Take  the  City  of  Chicago.  Sup- 
pose you  have  duties,  as  we  have  in  the  United  States,  averaging 
an  ad  valorem  duty  of  45  or  50  per  cent.  Suppose  the  State  of 
Illinois  should  impose  duties  upon  every  product  that  came  into 
this  city  of  45  or  50  per  cent.  Why,  the  result  would  be  that  the 
whole  manufacturing  interests  of  the  City  of  Chicago  would  be 
in  the  hands  of  a  trust,  and  you  have  no  doubt  about  it.  You 
will  all  agree  with  me  there.  You  can  see  in  a  moment  that  if 
you  restricted  competition  in  so  small  an  area  you  would  get 
trusts.  Now,  extend  it.  Suppose  the  State  of  Illinois  limited 
competition  to  the  State  of  Illinois,  as  many  of  the  States  did 
before  the  Constitution.  Our  State  of  New  York  did.  Well,  it 
was  terrible,  and  we  are  all  ashamed  of  it  now;  but  we  imposed 
duties  upon  the  goods  of  Connecticut  and  New  Jersey,  and  then 
we  put  on  duties  upon  foreign  products  and  made  Connecticut 
and  New  Jersey  contribute  to  our  support  to  the  amount  of 
about  50,000  pounds  a  year.  Now,  suppose  we  limit  it  to  the 
State  of  Illinois,  and  put  duties  on  all  goods  coming  into  Illinois 
of  45  or  50  per  cent.  Why,  you  would  have  all  your  manufac- 
turing in  the  hands  of  a  few  men.  You  would  have  the  trust, 
because  competition  would  be  limited.  Extend  it  to  the  United 
States,  and  you  will  admit  that  it  is  easier  to  form  a  trust  in  the 

447 


United  States  than  it  would  be  a  world-wide  trust,  because  you 
would  limit  competition  to  this  country. 

TARIFFS  AND  TRUSTS. 

It  seems  to  me  to  be  evident  that  protective  tariffs  aid  in  the 
establishments  of  trusts.  They  do  not  make  all  the  trusts  by 
any  means.  The  Anthracite  Coal  combine  have  all  the  anthra- 
cite coal  of  this  country,  and  they  can  form  trusts  very  easily. 
You  can  form  a  trust  in  petroleum,  quick  silver,  iodine, 
diamonds.  Whenever  any  body  of  men  get  absolute  control  of 
a  product  they  can  form  a  combination,  tariff  or  no  tariff.  But, 
gentlemen,  right  in  connection  with  the  tariff  comes  the  law 
which  aids  the  trust,  and  it  was  gotten  up  to  make  avail  of  the 
tariff.  In  1885,  Andrew  Carnegie,  in  the  American  Manufac- 
turer, said  that — 

"We  are  the  children  of  the  tariff,  and  if  we  ever  take  ad- 
vantage of  the  tariff  to  form  combinations  it  will  not  exist 
through  a  single  session  of  Congress." 

And  what  has  occurred?  They  are  all  taking  advantage  of 
the  tariff  to  form  combinations  and  to  keep  out  the  foreign 
manufacturer. 

If  the  duty  was  down,  in  would  flow  the  foreign  product,  and 
you  could  not  maintain  your  trust  unless  it  was  the  anthracite 
coal  trust  or  some  other  trust  of  that  kind.  But  that  is  not  all. 
The  tariff  shuts  out  not  only  importation,  but  it  shuts  in  your 
own  products  and  you  get  a  surplus,  more  than  you  can  sell,  and 
then  you  look  around  and  put  your  heads  together  to  see  how 
you  can  keep  down  the  surplus  and  put  up  the  price. 

Do  you  have  any  doubt  that  a  protective  tariff,  when  it  shuts 
out  foreign  products,  shuts  in  home  products ;  when  it  destroys 
importation  it  destroys  exportation? 

Why,  Mr.  Chairman,  more  than  seventy-five  years  ago  a 
Massachusetts  Yankee  put  the  whole  problem  in  a  single  sen- 
tence. It  was  on  the  tariff  of  1824,  and  they  were  going  to  put 
a  duty  on  molasses  from  the  West  India  Islands,  and  this 
Massachusetts  yankee  said,  through  his  nose:  "We  up  in  Massa- 
chusetts don't  want  a  duty  on  molasses.  We  trade  our  fish  for 
molasses,  and  if  you  shut  out  molasses  you  shut  in  fish."  And 
there  is  the  whole  problem.  And,  gentlemen,  when  you  shut 
out  foreign  products  you  shut  in  home  products  you  create  a 
surplus,  and  then  you  gentlemen,  at  least  some  of  you  who  have 

448 


been  prosecuted,  who  have  had  something  to  do  with  it,  must 
know  that. 

Now,  gentlemen,  let  us  see  another  phase  of  this  question.  If 
you  keep  a  surplus,  if  you  have  a  large  surplus  of  products,  you 
are  sure  to  form  trusts,  if  you  can,  and  the  law  comes  in  to  help 
you.  Now  let  me  tell  you  about  that  law.  (Turning  to  the 
Chairman.)  We  are  both  New  Yorkers,  and  do  you  know 
where  that  law  came  from  under  which  the  trusts  are  being 
formed  in  New  York?  In  about  1882,  the  first  State  in  the 
Union  went  to  Albany  and  passed  a  law  imposing  terrible  penal- 
ties upon  trusts,  I  think  a  fine  of  $5,000  and  a  year's  imprison- 
ment, and  at  the  same  Legislature  they  passed  another  law 
allowing  every  corporation  to  use  its  assets  in  the  purchase  of 
the  stock  of  any  other  corporation.  So  they  took  care  of  the 
manufacturer  by  allowing  the  holding  companies  to  be  formed, 
and  at  the  same  Legislature  they  passed  a  law  imposing  a 
penalty,  on  conviction,  of  $5,000  and  one  year's  imprisonment 
upon  those  who  formed  a  combination  ;  and  out  of  that  law  the 
holding  by  a  corporation  of  the  stocks  of  another  corporation 
originated  the  modern  trust. 

But,  gentlemen,  there  is  another  reason ;  and  now  I  want  to 
tell  you  the  most  important  reason  for  trusts.  You  base  your 
industries  upon  the  natural  law  of  exchange  and  you  have  got 
a  foundation  as  firm  and  as  steady  as  the  earth  itself.  You  base 
it  upon  an  artificial  condition,  base  industries  upon  laws  enacted 
by  the  caprice  of  man  and  change  from  time  to  time,  and,  fre- 
quently, because  we  are  crazy  on  the  subject  of  passing  laws  in 
this  country :  Everything  from  a  wooden  leg  up  to  unrequited 
affection  is  cured  by  law.  They  vomit  them  forth  like  shot  from 
a  gatling  gun,  and  law  is  a  sovereign  specific  for  every  evil. 
Base  your  industries  upon  law  and  you  have  got  an  unstable 
foundation,  always  changing,  resulting  in  gluts,  accumulation 
of  surplus,  in  bankruptcy,  in  unstable  conditions,  as  unstable 
as  the  ocean  itself.  Put  a  bandage  on  that  arm  tight  enough 
and  you  shut  off  the  flow  of  blood.  Put  bandages  or  apply 
quack  remedies  to  trade  and  you  stop  circulation  of  trade.  The 
natural  law  of  exchange  is  the  law  that  keeps  things  steady  and 
firm. 

If  Congress  adjourned  for  twenty  years  and  not  another  law 
was  passed  on  any  subject  affecting  your  business,  and  if  it  could 
have  the  steadiness  which  comes  from  the  natural  exchange  of 

449 


products,  you  would  grow  rich  and  vou  would  have  no  appre- 
hension and  you  would  stop  doing  some  of  the  things  that  are 
being  done  in  our  day.  We  need  in  this  country,  with  our  won- 
derful resources,  to  do  away  with  law-making  affecting  indus- 
tries. 

Gentlemen,  I  will  not  take  up  the  whole  subject.  I  am  not 
here  to  speak  to  a  theory.  I  am  neither  Republican  nor  Demo- 
crat.  I  am  an  American  citizen.  The  Mayor  of  New  York  is  a 
Republican.  In  fact  I  never  voted  for  but  one  Tammany  Mayor 
in  New  York,  although  I  am  regarded  as  a  Democrat ;  but  as  an 
American  citizen  I  ask  for  justice.  Why,  yesterday  I  heard  a 
man  in  this  audience  say  he  was  from  Oklahoma,  and  he  said  he 
did  not  represent  manufacturing;  he  represented  the  consumers, 
and  I  said  in  my  heart,  "God  bless  that  fellow  from  Oklahoma." 
Now,  I  am  here  for  the  consumer,  and  I  am  here  because  I  want 
justice  for  the  consumer. 

For  fifty  years,  gentlemen,  I  have  seen  passing  before  me  the 
vision  of  millions  of  families,  mothers,  fathers  and  children,  all 
passing  on,  ghastly  pallid,  poor,  each  paying  his  tribute  to  this 
monstrous  evil  of  protection ;  and  gentlemen,  I  want  to  see  the 
burden  lifted  from  them ;  and  in  that  vision  I  see  another  sight, 
and  that,  gentlemen,  is  that  little  knot  of  great  magnates,  one 
of  them  Mr.  Baer,  who  said,  "We  are  the  gentlemen  whom  God 
has  put  in  possession  of  the  industries  of  the  country."  Why, 
the  Almighty  supervises  a  great  many  things  that  I  would  not 
want  to  touch  with  a  grappling  hook,  if  that  is  so. 

MR.  WAKEMAN :  Mr.  Chairman  and  gentlemen,  I  confess 
my  inability  to  represent  Hon.  Charles  Warren  Laporte,  former 
Governor  of  Rhode  Island,  who  would  have  been  with  you  to- 
day except  for  serious  illness.  I  see  very  little  in  what  has  been 
said,  and  I  think  I  will  cut  my  time  short  to  answer  the  last 
speaker.  He  referred  to  anthracite  coal,  and  I  presume  you  all 
know  there  is  no  duty  upon  anthracite  coal.  He  did  not  refer 
to  the  Standard  Oil.  He  did  not  refer  to  the  fact  that  there  is 
no  duty  upon  oil,  crude  or  refined. 

MR.  PIERCE:    There  is  a  duty  on  it. 

MR.  WAKEMAN:  I  will  give  you  part  of  my  time  if  you 
wish  it.  I  wish  to  say  this :  That  we  have  trusts  and  combina- 
tions in  this  country ;  we  have  many  of  them.  We  have  the  In- 
ternational Harvester  Company  here  in  Chicago,  and  there  is  a 
duty  on  such  machines  as  they  manufacture  coming  into  this 

450 


country.  But  how  is  that  formed?  What  is  the  reason  for  It? 
It  is,  under  the  patent  laws  of  this  country,  extended  to  civilized 
nations.  Am  I  right?  You  run  along  down  the  line.  I  care  not 
what  combinations  you  refer  to,  whether  it  be  the  International 
Harvester  or  the  United  States  Shoe  Machinery  Company,  or 
almost  any  of  them;  there  may  be  some  exceptions.  Be 
honest,  be  truthful  in  every  statement  you  make ;  but  as  a  rule 
the  combinations  of  this  country  and  in  the  countries  which 
recognize  the  patent  laws  the  combinations  are  based  upon  the 
patent  laws  of  those  countries.  Am  I  right  or  am  I  wrong? 
Name  those  that  are  not  formed  that  way.  Gentlemen,  I  am 
awfully  glad  to  be  with  you,  and  I  am  especially,  glad  to  have 
had  the  honor  of  delivering  a  body  blow  to  the  referee.  I  thank 
you  very  much  for  your  attention,  and  I  will  give  the  remainder 
of  my  time  to  Mr.  Pierce. 

THE  CHAIRMAN:  I  am  happy  to  announce  that  the  referee 
survives  the  body  blow.  By  the  arrangement  of  the  Committee 
on  Arrangements,  the  time  has  now  come  to  receive  the  report 
of  the  Committee  on  Resolutions.  As  I  understand  the  rules 
laid  down  by  the  Committee  on  Arrangements,  the  vote  will  be 
had  upon  these  resolutions  not  later  than  12  o'clock.  Each  one 
speaking  to  the  resolutions  will  be  allowed  three  minutes,  and 
no  one  is  to  be  permitted  to  speak  to  the  same  subject  more  than 
once,  and  the  time,  under  the  conditions  prevailing,  cannot  be 
extended  in  favor  of  any  one  speaker.  I  have  now  the  pleasure 
of  calling  upon  Mr.  Albert  Shaw,  the  chairman  of  the  Committee 
on  Resolutions. 

MR.  ALBERT  SHAW :  Mr.  Chairman  and  gentlemen  of  the 
Conference,  your  Committee  on  Resolutions  consisted  of  an  ap- 
pointee from  each  State  represented  here,  selected  by  the  repre- 
sentatives from  the  particular  States,  and.  those  State  representa- 
tives were  about  forty  in  number.  In  addition  to  the  forty, 
fifteen  were  appointed  at  large  from  the  conference,  by  the  chair. 
The  total  committee,  therefore,  was  a  committee  of  fifty-five* 
gentlemen.  The  members  of  your  committee  met  at  the  hour 
announced  from  this  platform  for  organization,  and  having  se- 
lected a  chairman,  they  authorized  the  appointment  of  a  sub- 
committee, which  should  take  in  hand  the  resolutions  offered 
from  this  platform  or  resolutions  presented  in  some  other  way 

4Si 


by  the  members  of  the  conference.    The  sub-committee,  which 
was  a  committee  of  nine,  received  at  the  earliest  possible  hour 
all  the  material  offered  by  the  conference,  considered  everything 
with  patience  and  with  care,  to  my  knowledge,  spent  many  hours 
in  going  over  the  material  which  seemed  to  them  germane  to  the 
work  of  this  conference;  found  it  necessary,  in  order  to  reach 
any  basis  of  agreements  at  all,  to  exclude  strictly  everything 
which  they  regarded  as  not  absolutely  germane.     You  can  easily 
understand  that  there  are  a  great  many  topics  that  were  closely 
related;  there  are  a  great  many  matters  which  have  bearing  upon 
the  subject  of  this  conference,  but  that,  in  a  body  like  this,  called 
to  consider  topics  of  a  particular  sort,  it  would  be  impossible  to 
adopt  resolutions  unless  the  matters  considered  in  the  resolu- 
tions were  held  down  to  somewhat  severe  limits  as  to  subject 
matter.     The  sub-committee,  therefore,  ruled  in  that  way  and 
were    upheld    in   that   ruling   unanimously   by   your    large    and 
representative  committee  of  fifty-five.     The  sub-committee,  after 
many  hours  of  labor,  succeeded  in  agreeing  with   entire   har- 
mony,   upon    a    statement     which    covers,    as     well    as    they 
found  it  feasible  to  do,  for  purposes  of  agreement,  the  matters 
which  it  seemed  possible  to  them  to  present  to  this  conference, 
with  the  hope  that  they  might  be  acceptable  to  all  of  you.    Now, 
the  large  committee  of  fifty-five,  a  very  able  body  of  men  whom 
you  selected  to  represent  you,  met  last  evening  and  were  in  ses- 
sion three  or  four  hours,  a  body  of  men  in  full  possession  of 
their  faculties  and  in  full  possession  of  their  opinions,  and  every 
line  of  the  report  that  the  sub-committee  presented  was  sub- 
jected to  very  careful  and  very  alert  scrutiny,  with  very  ample 
discussion.     I  am  happy  to  be  able  to  report  that  this  large 
committee,  representing  the  States  and  Territories  assembled 
here,  and  representing  different  bodies  of  organizations,  of  com- 
merce and  of  labor,  represented  here,  were  able,  at  the  conclu- 
sion of  things,  to  agree  without  a  dissenting  voice,  in  perfect 
temper  and  spirit  upon  the  adoption  of  the  report  that  the  sub- 
committee had  presented,  with  various  modifications  which  the 
able  gentlemen  of  the  larger  committee  suggested,  and  which 
were  gladly  accepted  by  the  sub-committee.     The  spirit  of  com- 
promise and  harmony  that  prevailed  in  the  large  committee,  I 
feel,  is  likely  to  prevail  here,  because  you  all  know  the  inherent 
difficulties  in  preparing  any  form  of  resolution  that  shall  express 
any  sort  of  opinion  and  obtain  the  consent  of  a  large  body  of 
active  men,  an  independent  body  of  men,  to  it,  and  obtain  any- 

452 


thing  like  the  harmony  we  desire.  The  only  thing  we  can  vote 
upon  is  something  like  an  irreducible  minimum,  those  things  we 
agree  on  and  allow  to  go  by,  those  things  which  we  ourselves 
would  prefer.  There  are  many  things  I  would  personally  be 
glad  to  see  in  the  resolutions,  but  they  are  not  there.  I  could 
not  get  them  there  because,  if  I  had  urged  that  they  be  put 
there,  I  should  not  have  been  able  to  get  an  agreement.  There 
are  many  things  which  you  might  like  to  see  in  the  resolutions 
which  are  not  there.  The  reason  is  not  that  the  members  of 
the  committee  were  not  friendly  or  unfavorable  to  them,  but 
because  under  the  circumstances  we  could  not  go  as  far  as  we 
wanted  to  go  to  put  forth  some  kind  of  expression  of  this  con- 
ference. So  on  behalf  of  the  committee,  I  appeal  to  your  good 
temper  and  to  your  spirit  of  compromise,  and  I  feel  confident 
of  the  result.  I  shall  ask  Dr.  Talcott  Williams,  on  behalf  of 
the  committee  at  large  and  the  sub-committee,  to  present  the 
resolutions  as  drafted  and  as  agreed  upon,  and  after  he  has  read 
them  I  shall  ask  permission  to  move  their  adoption.  Then  the 
whole  subject  will  be  before  you  under  the  limitations  announced 
by  the  chair,  those  limitations  being  that  we  are  expected  to 
come  to  a  vote  as  soon  as  we  can,  and  not  later  than  12  o'clock, 
as  announced.  Dr.  Talcott  Williams  will  now  represent  the  com- 
mittee in  the  presentation  of  the  report. 

DR.  TALCOTT  WILLIAMS,  presenting  the  report  of  the 
Committee  on  Resolutions,  said: 

Mr.  Chairman  and  gentlemen  of  the  convention,  I  am  here  as 
the  mouthpiece  of  the  chairman  of  the  Committee  on  Resolu- 
tions, to  whose  tact,  force  and  leadership  we  are  indebted  for 
the  unanimous  conclusion  by  the  sub-committee  of  your  commit- 
tee on  resolutions  and  by  your  Committee  on  Resolutions,  in  the 
adoption  by  both  of  them,  without  a  dissenting  voice,  with  every 
possible  interest  represented  on  this  floor  present  at  the  meet- 
ings of  those  two  committees,  and  the  declaration  of  principles 
and  of  action  which  I  now  have  the  honor  to  read,  which  it  was 
thought  desirable  should  express  both  the  reasons  for  the  ac- 
tion and  the  action  which  is  proposed,  and  I  am  now  simply  to 
read  what  the  chairman  of  the  committee  will  later  move  to 
adopt.    I  have  the  honor  to  read  to  you  now  this  declaration. 

RESOLUTIONS.  , 

The  report  of  the  Committee  on  Resolutions  was  as  follows : 
After  twenty  years  of  federal  legislation  as  interpreted  by  the 

453 


courts,  directed  against  the  evils  of  trusts  and  combinations,  and 
against  railroad  rebates,  beginning  with  the  interstate  commerce 
act  of  1887  and  the  anti-trust  act  of  1890,  a  general  and  just  con- 
viction exists  that  the  experience  gained  in  enforcing  these  fed- 
eral acts  and  others  succeeding  them  demonstrates  the  necessity 
of  legislation  which  shall  render  more  secure  the  benefits  already 
gained  and  better  meet  the  changed  conditions  which  have  arisen 
during  a  long  period  of  active  progress,  both  in  the  enforcement 
of  statute  law  and  in  the  removal  of  grave  abuses  in  the  man- 
agement of  railroads  and  corporations.  These  changes  now 
demanded  are : 

First — Immediate  legislation  is  required,  following  the  recom- 
mendation of  President  Roosevelt  and  the  Interstate  Commerce 
Commission,  permitting  agreements  between  railroad  corpora- 
tions on  reasonable  freight  and  passenger  rates,  subject  in  all 
respects  to  the  approval,  supervision  and  action  of  the  Inter- 
state Commerce  Commission. 

Second — The  enforcement  of  the  Sherman  act  and  the  pro- 
ceedings under  it  during  the  administrations  of  Presidents  Har- 
rison, Cleveland,  McKinley  and  Roosevelt  have  accomplished 
great  national  results  in  awakening  the  moral  sense  of  the  Amer- 
ican people  and  in  asserting  the  supremacy  and  majesty  of  the 
law,  thus  effectually  refuting  the  impression  that  great  wealth 
and  large  corporations  were  too  powerful  for  the  impartial  exe- 
cution of  law.  This  great  advance  has  rendered  more  secure 
all  property  rights,  resting,  as  they  must,  under  a  popular  gov- 
ernment, on  universal  respect  for  and  obedience  to  law.  But 
now  that  this  work  is  accomplished,  it  has  revealed  the  necessity 
for  legislation  which  shall  maintain  all  that  the  Sherman  act  was 
intended  to  secure  and  safeguard  interests  it  was  never  expected 
to  affect. 

As  the  next  step  in  executing  the  determination  of  the  Amer- 
ican people  to  secure  in  all  industrial  and  commercial  relations 
justice  and  equality  of  opportunity  for  all,  with  full  sympathy 
and  loyal  support  for  every  effort  to  enforce  the  laws  in  the 
past,  we  urge  upon  Congress  without  delay  to  pass  legislation 
providing  for  a  non-partisan  commission,  in  which  the  interests 
of  capital,  of  labor  and  of  the  general  public  shall  be  represented. 
This  commission,  like  a  similar  commission,  which  proved  most 
successful  in  Germany  in  1870,  shall  consider  the  entire  subject 
of  business  and  industrial  combinations  and  report  such  pro- 

454 


posals  as  to  the  formation,  capitalization,  management  and 
regulation  of  corporations  (so  far  as  the  same  may  be  subject 
to  federal  jurisdiction)  as  shall  preserve  individual  initiative, 
competition,  and  the  free  exercise  of  a  free  contract  in  all  busi- 
ness and  industrial  relations.  Any  proposed  legislation  should 
also  include  modification  of  the  prohibition  now  existing  upon 
combinations  on  the  following  subjects: 

1.  National  and  local  organizations  of  labor  and  their  trade 
agreements  with  employers  relating  to  wages,  hours  of  labor, 
and  conditions  of  employment. 

2.  Associations  made  up  of  farmers,  intended  to  secure  a 
stable  and  equitable  market  for  the  products  of  the  soil  free 
from  fluctuations  due  to  speculation. 

3.  Business  and  industrial  agreements  or  combinations 
whose  objects  are  in  the  public  interest  as  distinguished  from 
objects  determined  to  be  contrary  to  the  public  interest. 

4.  Such  commission  should  make  a  thorough  inquiry  into 
the  advisability  of  inaugurating  a  system  of  federal  license  or 
incorporation  as  a  condition  for  the  entrance  of  certain  classes 
of  corporations  upon  interstate  commerce  and  also  into  the  re- 
lation to  the  public  interest  of  the  purchase  by  one  corporation 
of  the  franchises  or  corporate  stock  of  another. 

On  no  one  of  these  subjects  must  what  has  been  gained  be 
sacrificed  until  something  better  appears  for  enactment.  On 
each,  this  conference  recognizes  differences  between  good  men. 
On  all,  it  asks  a  national  non-partisan  commission  to  be  ap- 
pointed next  Winter  to  consider  the  question  and  report  at  the 
second  session  of  the  approaching  Congress  for  such  action  as 
the  national  legislature,  in  the  light  of  this  full  investigation, 
may  enact. 

Third — The  examination,  inspection  and  supervision  of  great 
producing  and  manufacturing  corporations,  already  begun  by 
the  Department  of  Commerce  and  Labor  and  accepted  by  these 
corporations,  should  be  enlarged  by  legislation  requiring, 
through  the  appropriate  bureaus  of  the  Department  of  Com- 
merce and  Labor,  complete  publicity  in  the  capitalization,  ac- 
counts, operations,  transportation  charges'  paid,  and .  selling 
prices  of  all  such  producing  and  manufacturing  corporations 
whose  operations  are  large  enough  to  have  a  monopolistic  in- 
fluence. This  should  be  determined  and  decided  by  some  rule 
and  classification  to  be  devised  by  the  commission  already  pro- 
posed. 

455 


Fourth — The  conflicts  between  State  and  Federal  authorities 
raised  in  many  States  over  railroad  rates  being  now  under  ad- 
judication and  under  way  to  a  final  and  ultimate  decision  by  the 
Federal  Supreme  Court,  this  conference  deems  the  expression 
of  an  opinion  on  these  issues  unfitting,  and  confidently  leaves 
this  great  issue  to  a  tribunal  which  for  118  years  has  successfully 
preserved  the  balance  between  an  indissoluble  union  and  in- 
destructible States,  defining  the  supreme  and  national  powers 
of  the  one  and  protecting  the  sovereign  and  individual  powers 
of  the  other. 

Albert  Shaw,  New  York,  Chairman. 
John  H.  Gray,  Minnesota,  Secretary. 

DR.  ALBERT  SHAW:  Mr.  Chairman— On  behalf  of  the 
Committee  on  Resolutions,  I  beg  to  move  the  adoption  of  the  re- 
port which  has  just  been  read  by  the  chairman  of  the  sub- 
committee. 

Motion  seconded. 

THE  CHAIRMAN:  The  report  of  the  committee  is  now 
open  for  discussion.  May  I  ask  that  each  speaker,  as  he  rises, 
will  state  his  name  and  the  State  from  which  he  comes? 

DR.  SHAW:  I,  as  the  mover  of  the  adoption  of  the  report, 
have  no  statement  whatsoever  to  make,  and  will  await  the  dis- 
cussion from  the  floor. 

MR.  EDWARD  E.  BESSETTE  (International  Typographical 
Union) :  Mr.  Chairman,  and  gentlemen,  there  is  one  statement 
here  that  I  can't  go  along  with  conscientiously,  while  I  like  the 
report  as  a  whole,  in  the  second  section,  where  it  says : 

"Thus  effectually  refuting  the  impression  that  great  wealth 
and  large  corporations  were  too  powerful  for  the1  impartial 
execution  of  law." 

Mr.  Chairman,  during  the  debate,  since  the  opening  of  this 
morning's  session,  I  have  heard  numerous  speakers  on  the  floor 
state  that  the  maiestv  of  the  law  was  one  of  our  standards  that 
must  be  maintained.  I  fully  agree  with  them,  but  when  it 
comes^to  the  impartial  execution  of  the  law,  Mr.  Chairman,  I 
wish  to  deny  that  statement,  from  personal  experiences. 

Mr.  Chairman,  and  gentlemen,  when  a  workingman  goes  into 
the  courts,  when  he  is  cited  into  court  for  the  violation  of  an 
iniunction  secured  by  some  of  these  bis*  corporate  interests, 
what  chance  has  he  got  for  his  liberty?  He  is  brought  in  on 
affidavits  issued  in  the  Court  of  Chancery.     They  issue  an  in- 

456 


junction  citing  a  workingman  to  come  into  court.  They  prove 
Bill  Jones,  Dick  Smith  or  somebody  else  did  violate  that  in- 
junction, and  the  man  on  trial  does  not  know  anything  about 
what  Bill  Jones  or  Dick  Smith  did.  They  prove  a  case  against 
some  imaginary  man  or  detective  hired  for  the  purpose,  and 
they  prove  that  the  defendant,  the  workingman  haled  into 
court,  lives  in  the  same  town  with  Bill  Jones  or  Dick  Smith, 
and  hence  he  is  a  co-conspirator  with  him  to  violate  the  in- 
junction. They  deny  that  man  his  constitutional  right  of  trial 
by  jury,  his  constitutional  right  of  trial  for  his  liberty.  Conse- 
quently the  judges,  sometimes  elected  by  money  paid  into  cam- 
paign funds,  deny  men  the  right  of  trial  by  jury,  and  the  judge 
makes  himself  judge,  sentencer  and  executioner;  the  judge  puts 
that  man  into  jail  without  the  right  of  trial  by  jury.  Have  they 
put  any  trust  officials  into  jail  for  anything  of  that  kind?  Not 
in  this  vicinity.  Yesterday  a  gentleman  from  the  State  of 
Indiana  got  up  and  took  a  slam  against  organized  labor.  He 
said  they  were  a  very  good  thing,  but  they  were  a  very  bad 
thing 

THE  CHAIRMAN :  I  am  sorry  to  interrupt  the  gentleman, 
but  his  time  is  up. 

MR.  BESSETTE:  I  will  say,  Mr.  Chairman,  that  I  have 
stated  my  opinion,  and  I  am  glad  of  that  opportunity,  limited 
as  it  was. 

A  DELEGATE:  Mr.  Chairman,  in  perusing  the  resolutions 
presented  to  this  convention,  you  will  find  that  these  commis- 
sioners are  to  be  appointed  to  see  that  the  workmen  are  justified 
in  what  they  are  doing.  That  is  what  we  are  up  against.  We 
should  be  reasonable  with  the  workingman  as  well  as  the  trusts. 

MR.  SAMUEL  GOMPERS :  I  think  that  I  am  fully  aware 
of  the  point  that  Delegate  Bessette  undertook  to  make,  and 
made  it  well.  It  must  be  borne  in  mind,  however,  that  among 
the  matters  with  which  this  report  deals  is  the  petition  to  Con- 
gress for  the  appointment  of  a  commission  made  up  of  repre- 
sentatives of  capital,  of  labor  and  of  the  general  public  for  the 
purpose  of  inquiring  into  and  making  reports  upon  certain  ques- 
tions of  the  kind  Mr.  Bessette  raised,  the  denial  of  the  right  of 
trial  by  jury,  the  invoking  of  an  extraordinary  writ  never  in- 
tended to  be  applied  to  the  cases  to  which  he  refers. 

THE  CHAIRMAN :  The  resolutions  are  still  open  for  dis- 
cussion. 

MR.  D.  P.  MARUM  (Oklahoma)  :    Mr.  Chairman— In  sup- 

457 


port  of  the  adoption  of  that  second  clause  of  the  resolution  I 
wish  to  state  again,  representing  Oklahoma,  listening  to  what  has 
taken  place,  as  the  gentleman  from  Chicago  has  said,  it  is  impos- 
sible for  that  condition  to  exist  in  Oklahoma.  In  Oklahoma  a 
man  adjudged  in  contempt  of  court  is  entitled  to  a  trial  by  jury 
unless  the  contempt  is  committed  in  the  direct  presence  of  the 
court. 

THE  CHAIRMAN:  The  resolutions  are  still  open  for  dis- 
cussion. 

MR.  MARCUS  M.  MARKS  (New  York)  :  Mr.  Chairman 
— I  should  like  to  ask  whether  there  is  not  an  error  in  print- 
ing in  this  connection,  or  whether  it  is  the  intention  to 
have  this  phraseology  stand,  in  sections  i,  2  and  3.  First,  labor 
organizations ;  second,  farmers'  organizations,  and  third,  com- 
mercial organizations.     Speaking  of  labor  organizations,  it  says  : 

"National  and  local  organizations  of  labor  and  their  trade 
agreements  with  employers  relating  to  wages,  hours  of  labor 
and  conditions  of  employment." 

Does  it  not  mean  in  their  trade  agreements?  If  it  does  not 
it  is  not  impartial  as  compared  with  2  and  3.  Secondly,  you, 
in  these  resolutions,  put  a  specific  condition  which  relates  only 
to  commercial  organizations,  which  I  am  here  to  represent, 
when  you  say  they  must  do  nothing  which  is  contrary  to  the 
public  interest.  How  about  the  labor  organizations  on  that 
point?  How  about  the  farmers'  organizations?  I  do  not  know 
what  the  committee  had  in  view,  but  it  seems  to  me.  if  the 
public  interests  are  to  be  considered  that  they  should  be  con- 
sidered in  all  three  of  these  classes  of  our  society;  and  par- 
ticularly the  phraseology  of  No.  I.  which  excludes  national  and 
local  organizations  altogether,  unless  you  put  the  word  in  as  a 
substitute  for  and,  so  that  it  shall  read  "in  their  trade  agree- 
ments," with  which  I  am  heartily  in  accord ;  but  when  you  say 
"and  trade  agreements,"  it  makes  it  quite  different. 

THE  CHAIRMAN :  Mr.  Williams  will  answer  for  the  com- 
mittee. 

MR.  TALCOTT  WILLIAMS:  Mr.  Chairman— I  do  not 
look  upon  the  precise  point  as  to  "in"  and  "and"  as  material  or 
making  any  difference.  You  will  notice  what  is  proposed  is  that 
there  are  four  classes  which  are  to  be  referred  to  this  commis- 
sion. The  first  of  these  classes  is  the  general  working  of  labor 
organizations ;  the  second  is  the  general  working  of  farmers'  as- 

458 


sociations;  the  third  relates  to  combinations  and  agreements  of 
commercial  and  trade  organizations. 

All  these  are  subject  to  the  basis  that  they  shall  preserve 
individual  initiative  competition  and  free  exercise  of  free 
contract  in  all  business  and  industrial  relations ;  but  it  is  neces- 
sary, for  reasons  which  will  present  and  suggest  themselves  to 
my  friend  who  has  just  spoken,  where  popular  doubt  exists, 
that  there  should  be  a  distinction  drawn  in  the  expression  of 
these  resolutions,  but  it  does  not  in  the  least  follow  that  there 
is  any  distinction  in  the  general  lack  of  law  on  the  subject.  As 
my  friend  knows  perfectly  well,  no  court,  no  law  would  sanction 
— and  if  there  were  the  Constitution  would  make  it  impossible — 
any  attempt  to  make  it  any  different  with  reference  to  any 
of  the  organizations  of  interest  to  the  public,  to  men  in  labor 
organizations,  to  farmers  or  to  business  organizations.  All  are 
equal  before  the  law,  but  where  there  has  been  through  many 
years  a  constant  agitation,  some  of  it  bad  by  selfish  intent,  and 
some  of  it  pure  and  seeking  the  highest  interests  of  the  coun- 
try, the  latter  in  the  overwhelming  proportion,  it  is  wise  to 
guard  against  criticisms  by  drawing  attention  in  the  case  of 
business  and  commercial  agreements  to  the  fact  that  public  in- 
terest is  to  be  considered  in  deciding  what  restraints  of  trade 
shall  be  permitted,  and  what  restraints  of  trade  shall  be  for- 
bidden. And  I  hope  this  explanation  that  I  make  to  my  friend 
will  be  clear  to  him,  that  what  we  are  doing  is  not  drawing  a 
law  or  giving  a  legal  definition,  but  to  meet  public  and  popular 
definitions  in  expressing  what,  on  the  whole,  should  be  done. 

MR.  MARKS:  Mr.  Chairman,  I  rise  to  say  that  the  ex- 
planation is  to  me  very  satisfactory. 

MR.  THOMAS  CARL  SPELLING:  Mr.  Chairman,  I  do 
not  rise  to  make  any  speech,  but  I  do  not  feel  that  I  should  be 
satisfied  if  I  did  not  enter  my  protest  as  an  individual  against 
one  recommendation  of  the  committee  which  has  been  mostly 
discussed  here,  especially  by  one  side,  and  I  suppose  it  is  deemed 
the  most  important.  That  is  that  in  case  railroads  cannot  agree 
upon  rates  they  shall  go  into  effect  merely  if  the  Interstate 
Commerce  Commission  gives  them  its  sanction.  Gentlemen, 
I  fear  that  you  have  not  fully  considered  the  full  import  and  the 
consequence  of  such  a  law.  The  Interstate  Commerce  Com- 
mission now  has  absolutely  no  standard  for  the  fixing  of  rates. 
It  has  fixed  no  rate,  it  has  lowered  no  rate,  and  I  have  the 

459 


authority  of  Mr.  Mather  from  the  platform,  and  he  is  certainly 
well  posted  on  this  subject,  it  has  no  power  in  that  respect, 
under  the  Hepburn  Bill,  which  was  lost  sight  of  by  this  com- 
mittee, except  absolutely  arbitrary  power.  I  do  not  believe 
that  it  is  safe,  and  I  think  it  is  extremely  dangerous,  to  give  to 
a  commission  the  arbitrary  power  to  ratify  agreements  made  be- 
tween the  railroad  monopolies  of  this  country,  made  in  secret 
for  all  that  the  resolution  provides,  merely  if  they  secure  the 
ratification  of  a  small  commission,  a  commission  responsible  to 
no  one,  using  and  exercising  arbitrary  power.  There  is  one 
thing  that  might  have  been  recommended  in  connection  with 
that,  and  as  a  condition  granting  such  extraordinary  and 
dangerous  power.  That  is  to  provide  for  a  valuation  of  rail- 
road property.  These  commissioners,  in  public  utterances  all 
over  this  country,  have  said  that  the  railroads  are  not  over- 
capitalized. Why  do  they  say  it  and  how  do  they  reason  it 
out?  They  simply  point  to  earning  power.  What  is  that? 
The  railroads  have  capitalized  the  element  of  sovereignty;  they 
have  capitalized  the  sovereignty  of  the  people  that  has  been 
granted  to  them,  which  constitutes  two-thirds  of  their  capitali- 
zation to-day.  Now,  gentlemen,  is  a  commission,  without  re- 
sponsibilities, to  have  more  power  than  the  Government  of  the 
United  States,  under  the  Constitution,  more  power  than  all  the 
people  together  can  exercise?  Gentlemen,  I  simply  object  to  it. 
I  do  not  suppose  what  I  say  will  have  any  influence,  but  I  want 
to  go  on  record  as  objecting  to  it. 

MR.  J.  H.  WALLACE  (Iowa):  Mr.  Chairman,  I  have  no 
objections  to  make,  but  this  strikes  me  as  rather  humorous  in 
this  connection: 

"Any  proposed  legislation  should  also  include  modification 
of  the  prohibition  now  existing  upon  combinations  on  the  fol- 
lowing subjects:  'National  and  local  organizations  of  labor  and 
their  trade  agreements  with  employers  relating  to  wages,  hours  of 
labor  and  conditions  of  employment.  Associations  made  up  of 
farmers  intended  to  secure  a  stable  and  equitable  market  for  the 
products  of  the  soil,  free  from  fluctuations  due  to  speculation. '  " 

The  farmers  of  the  West  have  been  prosperous  simply  be- 
cause in  the  very  nature  of  things  they  cannot  enter  into  any 
trust.  No  trust  can  possibly  exist  unless  it  can  control  raw  ma- 
terial, and  the  raw  material  of  the  farmer  is  God's  sunshine  and 
rainfall,  which  are  given  to  him  year  after  year,  according  to  the 
Sovereign  Will  of  the  Almighty,  and  that  measures  his  pros- 

460 


perity.  Hence  there  is  no  trust  of  the  farmers,  because  they 
have  not  gone  into  the  trusts  and  combinations,  and  another 
reason  is  that  they  cannot  control  competition.  The  farmer  is  in 
competition  with  all  the  world,  and  for  that  reason  it  is  utterly 
impossible  and  foolish  to  talk  about  any  farmers'  combinations 
and  farmers'  trusts.  The  great  blessing  the  Lord  has  given 
the  farmer  is  that  it  has  been  made  impossible  for  him  to  form 
a  trust. 

MR.  M'KINLEY  (United  Brotherhood  of  Carpenters) :— I 
do  not  wish  to  say  anything  in  behalf  of  the  organization  I  rep- 
resent unless  it  be  this :  That  after  hearing  the  speeches  of 
yesterday  in  regard  to  the  action  on  the  subject  of  organizations 
and  trusts  and  the  Sherman  Anti-Trust  Act,  we,  as  an  organ- 
ization, have  not  been  affected  very  much  by  it,  because  we  have 
been  closely  living  up  to  the  law.  In  regard  to  the  resolutions 
just  proposed,  I  do  not  object  to  them  in  any  way.  I  would 
like  to  have  had  them  go  a  little  further.  I  have  had  an  idea 
all  along  during  this  conference  that  a  very  vital  spot  has  not 
been  touched,  or  scarcely  touched,  by  any  of  the  speakers. 
Whenever  I  hear  such  resolutions  in  regard  to  new  laws  and 
amendments  to  present  laws  there  comes  to  my  mind  a  few 
words  I  read  some  few  years  ago  by  an  author  of  past  years, 
I  believe  Charles  Kingsley,  who  said,  in  discussing  economic 
questions,  that  every  new  law  was  the  parent  of  greater  scan- 
dals; and  I  think  conditions  have  not  changed  to-day  from  what 
they  were  at  that  time.  Mr.  Low  made  the -remark  during  his 
address  that  what  was  wanted  was  a  higher  sense  of  honor 
among  business  men  of  the  country.  That,  to  my  mind,  came 
nearer  the  vital  spot.  Another  gentleman  from  Ohio,  night  be- 
fore last,  I  think,  believed,  or  hoped  that  the  day  would  come 
when  we  would  have  such  a  high  sense  of  honor  and  duty 
among  the  business  men  of  the  country  that  there  would  be  no 
need  for  such  laws  as  those.  He  believed  that  such  would  in 
time  come  to  be  the  condition,  and  indeed  I  hope  it  should. 
Now,  as  I  said  in  the  beginning,  I  would  like  it  if  the  resolu- 
tions had  gone  further  and  made  some  provision  or  some  ettort 
to  provide  for  a  higher  sense  of  honor  on  the  part  of  the  busi- 
ness men  of  this  country. 

MR.  P.  J.  GUERIN  (V.  P.  Franklin  Typographical  Society, 
Massachusetts) :  Gentlemen,  I  do  not  desire  to  detain  you 
more  than  one-half  minute.  I  am  not  out  of  sympathy  with 
these  resolutions,  but  it  was  explained  by  the  chairman  of  the 


committee,  and  this  impression  is  made  upon  my  mind,  that 
there  is  a  misapprehension  in  the  public  mind  concerning  cer- 
tain provisions  that  ought  to  be  maae  as  to  the  use  of  the  money 
of  the  corporations,  and  as  to  the  public  interests  and  the  labor 
unions  we  should  apply  the  same  rule,  and  in  order  to  get  a 
uniform  report  we  had  to  concede  something  in  favor  of  one 
that  we  could  not  concede  in  favor  of  the  other.  To  my  mind 
there  is  a  principle  that  we  ought  to  look  at  very  carefully.  I 
do  not  think  we  should  give  the  sanction  of  this  conference  to 
anything  of  this  nature,  that  there  is  need  to  concede  something 
to  public  prejudice  in  favor  of  one  section  of  the  country  or  one 
set  of  organizations  over  another.  I  think  that  is  a  misfortune, 
and  that  the  same  rules  should  apply  to  money,  to  public  in- 
terests and  to  labor  unions  uniformly. 

MR.  TOMPKINS  (North  Carolina) :  There  seems  to  be  a 
misapprehension  here.  This  report  does  not  undertake  to  come 
to  final  conclusions  on  any  of  these  subjects.  If  it  accomplishes 
anything  it  will  be  the  formation  of  a  commission  to  take  these 
subjects  under  further  consideration,  and  perhaps  give  years  to 
the  solution  of  questions  which  the  gentlemen  think  ought  to 
be  settled  here  now.  Any  one  who  does  not  think  that  the 
questions  to  go  before  the  commission  can  be  settled,  accord- 
ing to  their  definitions,  ought  to  get  consolation  out  of  the  fact 
that  under  the  commission^they  may  be  enlarged,  diminished  or 
otherwise  considered,  and  that  everybody  will  have  ample  time 
and  opportunity  to  appear  before  the  commission,  with  infinite 
opportunity  to  discuss  the  proposed  new  issues,  enlargements 
and  definitions.  This  report  simply  defines  how  this  subject  is 
to  be  pursued  in  the  future,  in  an  official  manner  and  without  in- 
jury to  anybody.  I  do  not  think  the  apprehensions  are  justified. 
The  subject  may  not  be  elaborate  enough,  but  it  need  not  con- 
cern them  because  it  does  provide  that  they  shall  have  ample 
opportunity  to  take  them  up. 

MR.  MEREDITH  (Virginia):  On  behalf  of  the  committee 
I  desire  to  say,  in  addition  to  what  my  friend  from  North  Caro- 
lina has  said,  that  this  whole  subject  should  be  taken  up  by  the 
most  prudent  and  competent  experts  we  have  on  the  subject 
and  be  threshed  out.  The  first  clause  on  the  subject  of  agree- 
ments, I  would  say  to  my  friend,  is,  like  everything  else,  sub- 
ject to  the  action  of  future  legislation,  and  whatever  is  neces- 
sary to  safeguard  anything  about  which  he  may  have  doubt,  in 
regard  to  the  secret  promulgation  of  those  rates,  for  instance, 

462 


he  will  have,  as  all  other  American  citizens  will  have,  an  oppor- 
tunity to  express  those  views  before  any  legislation  takes  place. 
As  to  my  friend  who  is  seated  on  the  stage,  we  congratulate, 
and  the  committee  feels  like  congratulating  him  and  the  agri- 
cultural interests  for  whom  he  spoke,  that  nature  has  protected 
them  from  trusts  and  combinations.  But  there  is  one  class  of 
farmers  in  this  country  who  produce  in  wealth  more  than  the 
combined  production  of  any  other  two  products,  and  those  are 
the  cotton  planters  of  the  South,  who  have  realized  within  the 
last  few  years  that  if  the  effort  to  continue  speculative  prices 
upon  their  products  is  not  stopped  their  market  will  be  seri- 
ously imperiled.  It  is  not  against  the  legitimate  purchase  of 
futures  in  cotton  or  anything  else  required  by  the  manufacturer, 
but  it  is  to  attack  that  speculative  movement  which  destroys 
trade,  commerce  or  anything  else  that  this  action  is  proposed. 
MR.  PRIEST  (Bricklayers'  Union):  I  want  to  say,  Mr. 
Chairman,  after  listening  to  this  discussion,  that  I  have  no  ob- 
jection to  the  resolutions,  but  being  a  tariff  believer  myself  for 
some  years,  and  I  am  to-day,  I  hope  this  commission  will  not 
overlook  the  people  of  the  country.  When  I  say  the  people  of 
the  country  1  mean  organized  and  unorganized  labor.  But  we 
do  want,  and  we  will  be  willing  to  concede  to  the  organizations 
of  other  industries,  and  we  will  all  be  tariff  believers,  probably 
all  Republicans,  if  you  please — if  you  so  desire,  we  care  not 
what  you  call  us,  providing  that  you  will  leave  the  tariff  law  as 
high  in  the  protection  of  the  laborer,  organized  and  unorgan- 
ized, as  you  do  against  that  which  he  produces.  If  you  will 
say  to  the  man  who  comes  into  our  country — and  the  males  I 
am  speaking  about,  not  the  females,  though  we  want  all  of 
them ;  we  have  lots  of  room  for  them — but  all  males  who  come 
into  this  country,  whatever  vocation  they  may  follow,  that  they 
shall  pay  to  the  Government  the  same  per  cent  on  each  dollar 
they  earn  at  their  vocation  as  the  charge  upon  the  product  that 
is  manufactured  on  the  other  side,  into  the  general  Government, 
until  he  becomes  a  citizen  five  years  hence. 

A  DELEGATE:  I  think  the  gentlemen  from  New  York  and 
Massachusetts  should  not  worry  about  this  commission,  because 
we  have  before  us  the  history  of  the  Industrial  Commission,  and 
I  believe  about  the  greatest  thing  that  it  did  accomplish  is  the  fact 
that  its  reports  are  now  weighing  down  shelves  in  buildings  in 
various  parts  of  the  United  States.  The  gentleman  from  New 
York  seemed  agitated  on  that  subject.     I  will  call  attention  to  the 

463 


fact  that  as  Congress  is  now  constituted,  he  need  have  but  very 
little  worry,  because  there  are  plenty  of  gentlemen  in  the  Sixtieth 
Congress  who  would  agree  on  a  law  to  put  me  in  jail  because  I 
did  not  agree  with  them  on  hours  of  work,  and  if  I  did  agree  with 
them  they  would  put  me  in  jail  anyway;  so  I  desire  to  say  to  the 
gentleman  that  he  need  have  no  fear  of  the  bugaboo  that  a  man 
might  be  able  to  write  a  trade  agreement  somewhere  else  in  the 
country. 

THE  CHAIRMAN :  Gentlemen,  there  remain  ten  minutes 
longer  for  discussion.  The  chair  does  not  wish  to  deprive  any 
one  of  an  opportunity  to  speak. 

The  resolutions  as  presented  by  the  chairman  of  the  Com 
mittee  on  Resolutions  were  then  put  to  a  viva  voce  vote  and 
unanimously  adopted. 

MR.  MEAD  (New  York)  :  Mr.  Chairman,  I  desire  to  offer 
a  resolution  at  this  time,  which  I  will  read: 

"Resolved  that  the  Committee  on  Finance  and  Publication 
be  charged  with  the  duty  of  compiling,  printing  and  distribut- 
ing to  the  delegates,  and  to  the  organizations  which  they  repre- 
sent, a  record  of  the  proceedings  of  this  convention. 

"Provided,  however,  that  the  funds  necessary  to  defray  the 
expense  thereof  be  contributed ;  and  be  it 

"Resolved,  That  said  committee  is  hereby  authorized  to  re- 
ceive funds  for  this  purpose,  and  that  the  organizations  repre- 
sented in  this  body  are  invited  to  contribute  thereto." 

The  resolution  was  unanimously  adopted. 

MR.  MARCUS  M.  MARKS:  Gentlemen,  I  propose  that 
we  give  a  rising  vote  of  thanks  to  the  Committee  on  Resolu- 
tions. 

A  rising  vote  of  thanks  was  then  tendered  the  Committee  on 
Resolutions. 

DR.  ALBERT  SHAW :  In  behalf  of  the  committee,  gentle- 
men, we  appreciate  very  much  your  unanimous  vote  of  thanks. 
The  large  committee  last  night  suggested  that  possibly  this  con- 
ference would  desire  to  have  these  resolutions  presented  to  Con- 
gress in  some  manner,  directly  from  this  conference.  Would  it 
be  your  wish  that  the  sub-committee  should  present  these  reso- 

464 


lutions  to  Congress,  or  are  you  satisfied  to  have  them  given  to 
the  press  for  publication,  and  in  that  way  find  their  way  to  Con- 
gress and  public  opinion? 

MR.  MARUM  (Oklahoma) :  I  move  that  the  chair  appoint 
as  a  committee  to  present  the  resolutions  to  Congress  the  gen- 
tlemen who  so  ably  performed  the  duties  of  a  sub-committee  of 
our  general  committee. 

MR.  MEAD:  I  would  offer  an  amendment  to  the  motion 
to  include  the  presenting  of  the  resolutions  to  the  President  of 
the  United  States. 

MR.  TOMPKINS  (N.  C):  I  hope  the  gentleman  from 
Oklahoma  will  accept  the  amendment,  that  the  committee  have 
the  power  to  add  to  its  number. 

MR.  GORE  (D.  C.) :  The  amendment  offered  by  Mr.  Tomp- 
kins is  the  identical  one  I  had  in  mind. 

THE  CHAIRMAN :  The  chair  understands  the  proposition 
in  its  present  shape,  with  the  amendments  offered  and  accepted 
by  the  mover  to  be  that  the  chairman  of  this  meeting  is  re- 
quested to  appoint  the  sub-committee  on  resolutions  as  a  com- 
mittee to  present  the  resolutions  to  the  Congress  and  to  the 
President  of  the  United  States,  and  that  that  committee  have 
power  to  add  to  its  number. 

Motion  carried. 

THE  CHAIRMAN:  Acting  in  accordance  with  that  re- 
quest and  those  instructions,  I  take  pleasure  in  naming  the  sub- 
committee to  perform  that  duty. 

MR.  C.  J.  WOODBURY  (Boston) :  Mr.  Chairman,  I  move 
that  the  thanks  of  the  conference  be  given  to  the  presiding 
officers  and  to  the  secretary  for  the  efficient  manner  in  which 
they  have  attended  to  their  respective  duties. 

MR.  GORE:  I  think  we  should  include  the  National  Civic 
Federation,  which  inaugurated  the  entire  movement. 

MR.  WOODBURY:     I  accept  the  amendment. 

Motion  carried  and  a  rising  vote  of  thanks  was  extended  in 
accordance  therewith. 

Upon  motion,  the  conference  adjourned  sine  die. 

46s 


INDEX 


Abbott,,    Lyman,  on  Purposes  of  Con- 
ference     10 

Abuses  of  Corporations 232 

Abuses  of   Trusts 247,   289 

Accountability  of  Corporations ....  137 
Accounting  of  Corporations,  should  be 

required.  193  ;  unreliable 420 

Accounting    of    Railways    Under    New 

Law    150 

Advantages  of  Combination, 

36,  160,  194,  380 
Administration   of   Corporations,    some 

model   rules 240 

"Administrative     Regulation     of    Cor- 
porations," Herbert  Knox  Smith, 

288-298 
Agreements,    between    publishers    and 

labor  unions 348 

Agreements,     "Reasonable    Agreements 
Beneficial     to      Commerce,"     W.     J. 

Schieffelin    303-316 

Agitation  Against  Trusts  Useful.  .  .374 
Amalgamated    Copper    Company,    how 

constituted    48 

American    Federation     of     Labor,    co- 
operates with  farmers 366 

American  Smelting  and  Refining  Com- 
pany, how  constituted 48 

"American    Society  of   Equity,   and   its 
need  in  our  country,"  J.  A.  Everitt, 
363-370 
American     Sugar     Refining     Company, 

how   constituted 49 

American     Telegraph     and     Telephone 

Company,  how  constituted 49 

American      Tobacco      Company,      how 

constituted    48 

Ankeny,  A.  T.    Address 66-75 

"Anti-Trust  Laws,"  P.  J.  Grosscup, 

221-231 

Anti-Trust  Laws  a  Mistake 290 

Articles    of    Confederation    Based    on 

State   Rights 108 

Attorneys-General,    "Principles   enunci- 
ated by  new   organization    of   Attor- 
neys-General."  Wade  H.  Ellis.  .41-57 
Australia.    Legislation   on  Trusts..  185 

Austria,  Trusts  in 437 

Bachelder,   N.   J.     Address.  .  .140-143 
Resolution   by,    144 ;   on   purposes   of 

conference 11 

Bancroft,  Edgar  A.     Address.  176-190 
Bank  Control  by  Nation   Precursor  of 

Railway  Control   300 

Banking,  National  Legislation  On .  .  135 

Barbour,  Geo.  H.    Address 380-383 

Belmont,  August.     Letter  from. . .  147 
Beneficial  Combination  Should  Be  Per- 
mitted    338 


Benefits  of  Combinations, 

36,  160,  194,  380 

Bessette,  Edward  E.  Discusses  Res- 
olutions    456 

Bingham,  James.     Discussion 419 

Black  List,  Use  by  Merchants'  Associa- 
tions in  Europe 313 

Borland,  Wm.  P.    Address 57-65 

Bookkeeping  Used  to  Conceal  Facts.420 

Bryan,  W.  J.  On  Trusts  and  Combi- 
nations    92,  181 

Bureau  of  Corporations ...  10,  91,  293 

Business  Not  Seriously  Affected  by  At- 
tacks on  Trusts 375 

Business  Interests  Not  Menaced  by 
Federal  Incorporation 362 

Butler,     Nicholas     Murray,     Chair- 
man   of    Conference.       Opening    ad- 
dress    35-39 

Campbell,  S.   W.     Resolution  by.. 342 

Capital  Engaged  in  Export  Trade.  .404 

Capitalization  of  Corporations,  Hon- 
esty in,  228,  423  ;  in  Great  Britain, 

397 

Cause  of  Combination  Not  in  Economic 
Conditions    215 

Centralization,  Governmental,  a  Dan- 
ger, 60  ;  Not  a  Danger 113,  296 

Chicago  Gas  Trust,    History 117 

Class   Legislation   Unendurable 81 

Combinations,  Develop  Nation,  393 ; 
Inevitable,    248,   376;   Unaffected  by 

Hostile   Daws 377 

See  also  Special  Topics. 

Commercial    Leaders,  Their   Services, 

264 

Commerce  Clause  of  Constitution, 
Early   Interpretation,   129 ;   Recent, 

355 

Commission  on  Corporation  Reform 
Needed    227 

Committees  Appointed,  Finance,  302 ; 
Resolutions,  219 ;  Rules  and  Order 
of   Business 83 

Committee  on  Arrangements 15 

Committee  on  Resolutions,  Report  of, 

453 

Common  Law  Opposed  to  Stock  Owner- 
ship in  Other  Companies,  45;  Not 
Opposed    to    Monopoly 385 

"Competition,  Evils  of,"  Grange  Sard, 

267-272 

Competition,  Disadvantageous,  161 ; 
Eliminated  by  Combination,  142,  150  ; 
Limited  by  Tariff,  268  ;  Natural  Law 
of,  281 ;  Services  in  Railway  Devel- 
opment, 211  ;  Utility  of 176 

Conditions  Favoring  Trust  Develop- 
ment  213 


466 


INDEX. 


Conference  on  Trusts  of  1899  ;  Its  At- 
titude, 181  ;  Numbers  Compared  with 
1907 14 

Conflict  of  Labor  and  Capital  Inevit- 
able    ..431 

Congress,  No  Power  to  Cbeck  Monop- 
oly as  Such 387 

Congress  Power  to  Charter  Corpora- 
tions, 352  ;  to  Control  Corporations, 
390;  to  Regulate  Commerce,  50,  68, 
129,  300,  355  ;    to  Regulate  Railroads, 

321 

Conservatism  Urged 174,  379 

Constitution,  Amendment  Needed  to 
Deal  with  Trusts,  114,  433 ;  Em- 
bodies State  Rights  Idea 109 

Constitutional  Questions  Before  Infe- 
rior Courts 79 

Consumers'  Interest,  in  Tariff  Reform, 
144 ;  Injured  by  Trusts,  252 ;  Op- 
posed to  Trade  Associations 333 

Contracts  in  Restraint  of  Trade  May 
Be  Reasonable   189 

Control.  "Uniform  Federal  and  State 
Control  Over  Interstate  Matters."  C. 
F.  Ziebold    107-114 

Control  of  Corporations  by  Nation 
Necessary,  360  ;  A  Sovereign  Power 
of  Nation,  134  ;  By  States 358 

Control  of  Industry,  Concentrated  by 
Corporations 223 

Co-operation  Not  Motive  for  Corpora- 
tions    199 

Co-operation  of  Government  and  Cor- 
porations Protects  Public 294 

"Corporate  Reforms,"  E.  E.  Prussing, 

231-245 

"Corporations  as  Such."     J.  S.  Crosby, 

198-207 

Corporations,  Cases  in  Federal  Courts, 
60 ;  Created  by  Congress,  53  ;  Defy 
the  Law,  59 ;  Instrumentalities  of 
Commerce,  358  ;  Intended  for  Public 
Duties,  200 ;  Lawlessness  of,  59 ; 
Laws  in  Different  States,  44 ;  Un- 
justly   Assailed 100 

See  also  Special  Topics. 

Courts.  "Conflict  Between  Federal 
and  State  Courts,"  D.  P.  Marum, 

75-83 

Courts,  Able  to  Settle  Rate  Question, 
328  ;  Corporation  Influences  in,  253  ; 
Deal  Partially  with  Labor  Organiza- 
tions, 457 ;  No  Power  to  Fix  Rail- 
way Rates   324 

Credit  Menaced  by  Agitation 147 

Crime  Under  Sherman  Act  Not  De- 
fined   259 

Crosby,  John  S.    Address 198-207 

Dawes,  Charles  G.  Address,  257- 
266  ;  On  Purposes  of  Conference . .  12 

Defebaugh,  J.  E.     Discussion 336 

Delegates,  List  of 17 

Democratization  of  Corporations  De- 
sirable     230 


Derthick,   F.   A.    Resolution   by..  157 

Destruction  of  Trusts,  Impracticable 
and   Undesirable 195 

"Destruction  or  Regulation,"  E.  A. 
Bancroft    176-190 

Destructive  Legislation  Futile 154 

Dingley  Tariff  Act,  Trusts  Formed  Un- 
der      439 

Directors  of  Cor  Derations  Should  Not 
Have  Exclusive  Control 239 

Discrimination  by  Railways  Upbuilds 
Trusts 105,   149 

Druggists,  Retailers,  Injured  by  De- 
partment Store  Competition,  316 ; 
Trade  Conditions 424 

Drug  Trade  Combination,  304 ;  De- 
clared Illegal,  304  ;  Its  Advantages. 

305 

Economic  Conditions,  Changes  of  100 
Years,  110  ;  Not  Cause  of  Combina- 
tions     215 

Ellis,  Wade  H.  Address,  41-57  ;  Dis- 
cussion     118 

Employers  Should  Deal  with  Labor 
Unions   416 

Employers'  Liability  Act,  Judicial  De- 
cisions    80 

England  Has  Few  Trusts 437 

England,  Prices  of  Railway  Securities, 

101 

"English  Comoanies  Act,"  H.  Jen- 
nings      396-398 

Equity,   American   Society   of.. 363-370 

Establishment  of  Corporations ....  236 

Everitt,  J.  A.     Address 363-370 

Export  Trade,  "Relation  of  Industrial 
Combinations  to  Export  Trade,"  J. 
H.    Gore 398-412 

Export  Business  Favors  Combinations, 

405 

Extravagance  as  Cause  of  Commercial 
Trouble    380 

Farmers,  "Farmers'  Interest  in  Trust 
Regulation,"  N.   J.   Bachelder, 

140-J.43 

Farmers,  Organizing  in  Society  of 
Equity,  364;  to  Secure  Better 
Prices    365 

Failure  of  Destructive  Legislation.  178 

Fear  of  Prosecution  Checks  Legitimate 
Business 425 

Federal  Control  Necessary 107 

Federal  Courts,  Inferior,  Corporation 
Cases  in,  60 ;  Criticism  of,  59 ; 
Should  Not  Interpret  Constitution, 
65;  Not  Violating  Law 89 

Federal    Encroachment    Deplored ...  86 

"Federal  Incorporation,"  Henry  W. 
Palmer    351-363 

Federal  Incorporation  as  a  Trust  Rem- 
edy, 218  ;  Not  Necessary  to  Prevent 
Stock  Ownership,  56;  Should  Be 
Compulsory,  136 ;  Would  Not  Injure 
States   360 


467 


INDEX. 


Federal  License  as  a  Trust  Remedy, 
196,  218 ;  Not  Necessary  to  Prevent 
Stock     Ownership , 56 

Federal  Regulation  of  Corporations, 
How  Far  Should  It  Go,  167;  Neces- 
sary     378 

Finance  Committee  Appointed 302 

Fisher,  Irving.    Address 190-193 

Foote,  Allen  Ripley.  Address,  278- 
285;   Resolutions  by 285,   372 

Foreign  Countries  Have  Trusts, 

164,  446 

Foreign  Corporations  Defy  State  Au- 
thority     62 

Foreign  Trade  Promotes  Elasticity  in 
Production    : 399 

Foulke,  Wm.  Dudley.    Address  87-100 

France  Permits  Merchants'  Associa- 
tions     308 

J  Furniture  Dealers,  Retail,  and  Unfair 
Competition,  317 ;  Prosecutions  in 
Oregon 319 

Gaedzik,  E.     Resolutions  by 432 

Germany,  Corporations  in,  172 ;  Mer- 
chants'   Associations,    308 ;    Trusts, 

437 

Gilder,  R.  W.,  on  Purposes  of  Con- 
ference   11 

Gompers,  Samuel.  Address,  245-256 ; 
Discusses  Resolutions,  457  ;  On  Pur- 
poses  of  Conference 13 

Gore,  J.  H.  Address,  398-412 ;  Dis- 
cussion     425 

Government  Operation,  as  a  Trust 
Remedy,  197;  Depends  on  Railways, 
124  ;  Generally  Ineffective 139 

Government  Ownership  of  Railroads 
Inevitable,  94 ;  Gains  and  Losses, 
95  ;  Multiplies  Public  officials. .  .106 

Government  Regulation  of  Railways, 
Essential,  124 ;  Does  Not  Imply 
Operation    139 

"Governmental  Regulation,"  Theodore 
Marburg    100-107 

"Governmental  Regulation  of  Competi- 
tive and  Monopolistic  Corporations," 
A.  R.  Foote 278-285 

Government  Regulation,  "What 
Next?"     F.    W.    Taussig 374-380 

Grant  of  Corporate  Charters,  Safe- 
guards     236 

Great  Britain,  Does  Not  Prohibit  As- 
sociations  of   Merchants 307 

Grocers,  Retail,  Do  Not  Need  Combi- 
nations  426 

Grosscup,  Peter  S.  Address,  221-231 ; 
Resolution  by,  372 ;  On  Purposes  of 
Conference   11 

Growth  of  American  Foreign  Trade .  401 

Growth  of  Combinations 149,206 

Guerin,  P.  J.  Discusses  Resolutions, 
461 ;  Offers  Resolution 371 

Hardware  Association,  Beneficial  in 
Results   336 

Hibbert,  Albert.    Discussion .  420,  424 

Hogan,  J.  F.     Discussion 427 

Holding  Companies,  Development  of  .43 


Holt,  Byron  W.     Address.  . .  .435-445 
Holt,  Hamilton.  On  Purposes  of  Con- 
ference     12 

Industrial  Combinations  Should  Be 
Regulated  When  They  Are  Monopo- 
lies    97 

Industrial  Commission  on  Trusts. 9,  181 
iudustrial  Corporations  Serve  Private, 

Not  Public  Ends 204 

Injunctions  in  Courts,  Abuses  of.. 253 
International  Harvester  Company,  How 

Constituted    49 

Interstate  Commerce,  "State  and  Fed- 
eral    Jurisdiction     Over      Interstate 

Commerce,"  W.  P.  Borland 57-66 

Interstate  Commerce  Commission,  Cum- 
bersome,    335 ;     No     Power    to     Fix 

Rates,   323  ;  Powers 272 

Interstate    Commerce    and    Intrastate 

Commerce    72 

Intrastate  Rates   Not  Subject  to  States 

Alone   276 

Introduction   9 

Jenks,  J.  W.     Address 148-156 

Jennings,  Hennen.     Address.  .396-398 
Judicial    Interpretation    of    Commerce 

Clause    355 

Kellogg,  Frank  B.    Address.  .209-219 
Kindred    and    Noncompeting    Corpora- 
tions   118 

Kinnear,  J.  W.     Discussion 421 

Kline,  M.  N.     Discussion 424 

Labor.  "Trust  Question  from  the  La- 
bor Standpoint."  Thomas  Carl  Spell- 
ing   383-392 

"Labor   Unions    and    Trusts."     Samuel 

Gompers 245-256 

"Adjustment  of  Labor  Problems  and 
the  Policy  of  Incorporating  Unions." 

D.    C.    Seitz 412-419 

Labor  Must  Seek  Strength  in  Unions, 

245 
Labor  Unions,  Akin  to  Trusts,  413 ; 
Are  Not  Trusts,  249  ;  Lack  Financial 
Responsibility,  414 ;  Not  Hostile  to 
Trusts,  153 ;  Recognized  by  Large 
Corporations,  251,  and  by  Publishers, 
347 ;  Seek  Higher  Standard  of  Liv- 
ing    430 

Laws,  Cannot  Destroy  Combinations, 
185  ;  Now  Existing  Adequate  to  Meet 
Evils,  429;  Useful,  Though  Not  En- 
forced    419 

Lawlessness  in  United  States  History, 

57 

Leavitt,  J.  E.    Resolution  by 371 

Legal  Remedies,  Conflict   of 41 

Legislation,  Attacks  Combinations,  Not 
Monopoly,  177 ;  Ineffective  Against 
Trusts,  221 ;  May  Be  Harmful,  171 ; 

Tendencies    180 

Low,  Seth.     Address 121-127 

Lynn  Board  of  Trade 371 

McKinley,  J.  D.  Discusses  Resolu- 
tions    461 


468 


INDEX. 


Management  of  Corporations,  Proper 
Principles 238 

Manufactures,  Exports  of   Products, 

402 

Marburg,  Theodore.  Address,  100- 
107  ;  Discussion,  423  ;  Statement  from 
Finance  Committee 383 

Market  for  Farm  Products,  How  Con- 
trolled     368 

Marks,  Marcus  M.  Discusses  Resolu- 
tions     458 

Marum,  D.  P.  Address,  75-83 ;  Dis- 
cussion, 332 ;  Discussion  of  Resolu- 
tions    457 

Mathie,  Karl.     Discussion 422 

Mather,  Robert.     Address ....  272-278 

Merchants'  Associations  in  Europe, 
306;  Control  Over  Members 310 

Middlemen    in  Sale  of  Farm  Products, 

365 

Miller,  John  S.,  on  Purposes  of  Con- 
ference     12 

Minority    Stockholders,    Protection    of, 

How  Secured  in  Great  Britain,  397; 

Needed  in  United   States 138 

Missouri,  Railway  Legislation 62 

Mitchell,  John,  on  Purposes  of  Con- 
ference     12 

Monopoly,  "Remedies  for  Monopolies 
and  Their  Results."  W.  D.  Foulke, 

87-100 

Monopoly  and  Despotism,  92  ;  Dangers, 
217  ;  Demands  Regulation,  98  ;  How 
Far  Inevitable,  104  ;  Natural  Law  of, 
283 ;  Not  Checked  by  Sherman  Act, 
386  ;  Not  Opposed  by  Common  Law, 

385 

Moore,  Avery  C.  Discussion,  394 ; 
Resolution   by 372 

Moral  Standards  Must  Be  Raised.  .297 

Meredith,  W.  R.  Discusses  Resolu- 
tions     462 

National  Control  of  Railway  Rates  Ex- 
tends to  Certain  Rates  Within  States, 
277 ;  Forced  by  Railway  Policy,  125  ; 
a   Necessity .' 301 

National  Powers,  Directly  Granted  are 

Scanty,    129 ;    Should    Be    Adequate 

to  National  Needs 112 

National  Regulation  of  Corporations 
Essential 164,  184 

National  Remedies,  Superior  Efficacy. 

42 

Natural  and  Artificial  Combinations, 

199 

Needham.  0.   W.      Discussion 429 

New  Jersey,  Charters  Sought  After..46 

"Newspapers.  Their  Relation  to  the 
Paper  Trust  and  to  the  Labor  Trust." 
Herman  Ridder 344-351 

Newspapers,  Decrease  in  Price  to  Read- 
ers, 346 ;  Magnitude  of  Business, 
344  ;  Partial  in  Dealing  with  Trusts. 

428 

Ninde,   J.   Newton.     Discussion.  .  .317 

Northern  Securities  Case 263 


Oklahoma,  Probate  Judge  Holds  Up  a 
General  Election    80 

Opportunities,  Individual,  Not  Obliter- 
ated  by    Trusts 154 

Othmer,    Henry.     Discussion 331 

Overproduction  Can  Be  Avoideu  Only 
by  Combination    340 

"Overcapitalization."     Irving  Fisher, 

190-194 

Overcapitalization,  Its  Dangers,  151  ; 
Chief  Evil  of  Trusts,  393 ;  Evil  in 
Public  Service  Corporations,  422 ; 
Evil  Exaggerated,  170,  190;  Pro- 
motes Deceit    191 

Owners  of  Wealth  Should  Have  Great- 
er Share  in  Its  Control 229 

Palmer,  Henry   W.     Address.  .351-363 

Panic  Not  Caused  by  Anti-Trust  Agita- 
tion     209 

Paper  Trust  Defended,  422  ;  Exactions 
of 350 

Parsons,  Frank.     Address 193-198 

Patents  as  a  Basis  for  Trusts 450 

Perkins,  G.  W.     Resolutions  by... 343 

Pierce,  Franklin.     Discussion . . .  .447 

Police  Power  of  the  Nation 133 

Pools,  Railway,   Not  Beneficial ....  212 

Pools  Unsatisfactory  Form  of  Combi- 
nation     159 

Popularization  of  Corporations  Neces- 
sary    230 

Post  Roads,  Right  of  Congress  to  Es- 
tablish    130 

Potter,  Henry  C,  on  Purposes  of 
Conference    11 

"Powers  of  State  and  Nation  Over  Cor- 
porations and  Trusts."  Bartlett 
Tripp   128-140 

Power  to  Regulate  Commerce  Cannot 
Be  Delegated  by  Congress,  321 ;  a 
National    Power 68 

Prices,  of  American  Goods  in  Foreign 
Markets,  142  ;  Not  Lowered  by  Com- 
binations, 152 :  Raised  by  Trusts. 
440;  Steadied  by  Combinations.  .152 

Price  Cutting  Not  an  Evil 419 

Privilege  the  Essence  of  the  Corpora- 
tions    205 

"Problems  Before  the  Conference."  Dr. 
Butler 35-39 

Professional  Classes,  Interest  in  Tariff 
Reform    144 

Progress.  Brings  Combinations,  279 ; 
Not  Result  of  Them 216 

Promoters'  Activity  in  Organizing 
Trusts    160 

Prosecutions,  of  Trusts  Justified.  395  ; 
Fear  of  Checks  Legitimate  Business. 

425 
Protective  Tariff,   Implies   Home  Com- 
petition,  141,  444  ;  invites  trusts.436 
Prussing,    E.    E.      Address,    231-245 ; 
Discussion,      117,      144 ;      Resolution 

by    256 

Public  Functions  Should  Be  Performed 
by  Public 202 


V 


469 


INDEX. 


Public  Opinion    Hostile  to  Trusts.  .162 

Public  Service,  Underlying  Idea  of 
Corporations 200 

Public  Service  Corporations,  Not  Dis- 
tinct from  Other  Corporations,  233  ; 
Regulation  of 284 

Publicity,  of  Corporate  Affairs,  292  ; 
as  to  Capitalization,  192 ;  Remedy 
for  Trust  Abuses, 

102,  165,  196,  218,  293,  409 

Quasi-public   Corporations  Defined. 201 

Railways  "National  Control  of  Rail- 
ways," Seth  Low 121-127 

"Railways  'and  the  People,"  D.  A. 
Tompkins   298-301 

Railways,  Agents  of  Public,  122  ;  Enti- 
tled to  Fair  Return,  382 ;  Govern- 
ment Ownership  Inevitable,  94 ;  Im- 
provements Checked,  101 ;  Lack  capi- 
tal for  Improvements,  121 ;  Require 
Government  regulation 124 

Rates,  Railway,  "Does  the  Power  to 
Regulate  Rates  in  the  Transportation 
of  Commerce  Rest  with  Congress  or 
the  States?"     A.  T.  Ankeny.  .  .66-75 

Rates,  Railway,  Difficulties  of  Regula- 
tion, 93 ;  Laws  Making  Defective, 
326;  Regulation  Checks  Improve- 
ments, 101 ;  Regulation  a  Legisla- 
tive Function,  322  ;  Should  Be  Made 
by  Carriers,  327  ;  Should  Be  Subject 
to  Court  Review,  327 ;  States  At- 
tempt to  Fix  Rates 67 

Receiverships  as  a  Trust  Remedy.  .197 

Regulation  of  Corporations,  by  Con- 
gress, 353  ;  by  Government  increas- 
ing, 93 ;  a  National  Matter,  107 ; 
Practicability  Demonstrated,  91 ; 
Undesirable  in  Great  Detail,  167  ;  in 
U.  S.  Under  Sherman  Act,  53  ;  Un- 
der Interstate  Commerce  Act 53 

Regulation  of  Intrastate  Commerce  a 
Commercial  Power  and  Therefore 
National    74 

Regulation  of  Public  Service  Corpora- 
tions, Better  Service  More  Needed 
Than  Reduction  of  Rates 105 

Regulation  of  Railways,  Aims  of..  126 

Regulation  of  Trusts,  Practicable,  155  : 
Probable  Future  of   156 

Resolutions,  Introduced,  144,  157,  256, 
285,  287,  342,  343,  344,  370,  371, 
372,  373,  432;  Report  of  Commit-. 
tee    453 

Resolutions,  Presentation  of  Resolu- 
tions to  Congress,  465  ;  Publication 
of  Proceedings,  464  ;  Thanks  to  Offi- 
cials     464,   465 

Restraint  of  Trade,  May  Be  Reason- 
able, 189  ;  Should  Not  Be  Curbed  Un- 
less Prejudicial    265 

Bidder,  Herman.     Address.  . .  .344-351 

Roosevelt,  Theodore,  Views  on  Trusts, 

182 

Sard,  Grange.     Address 267-272 

St.  Louis  West  End  Business  Men's  As- 
sociation, Resolutions  by 373 


Schieffelin,  Wu,  Jay.    Address, 

303-315 

Seitz,  D.  C.     Address 412-419 

Seligman,  Isaac  N.     Address.  159-176 

Shaw,,  Albert.  Statement  on  Behalf 
Committee   on  Resolutions 451 

Sherman  Act.  "Enforcement  of  the 
Sherman  Anti-Trust  Law."  F.  B. 
Kellogg 209-219 

"Sherman  Anti-Trust  Law."  C.  G. 
Dawes    _.j7-267 

Sherman  Law,  Amendment  Needed, 
285  ;  Broad  Application,  38  ;  Chiefly 
Applicable  to  Railways,  389 ;  Hasty 
and  Ill-advised,  258  ;  Ineffective,  378  ; 
Inequality  in  Enforcement,  260  ;  Ob- 
structs Business,  268  ;  Same  as  Com- 
mon Law,  386  ;  Upholds  Principle  of 
Competition,  211 ;  Validity  Sustained 
by  Courts   3o3 

Size  of  Corporations,  Dangerous  at 
Times,  88  ;   Not  a  Menace 37 

Small  Corporations  Do  Not  Require 
Federal  Control    167 

Smith,  Herbert  Knox.     Address, 

288-297 

Sovereign  Power,  Slowly  Conceded  to 
Nation    132 

Spelling,  Thomas  Carl.  Address, 
383-392  ;  Discussion,  433  ;  Discusses 
Resolutions   459 

Stahl,  John  M.,  on  Purposes  of  Con- 
ference    13 

States,  Control  Over  Foreign  Corpora- 
tions, 62  ;  Control  Effective  in  Local 
Matters,  336  ;  Inability  to  Regulate 
Great  Trusts.  89  ;  Laws  on  Corpora- 
tions Differ,  164  ;  Laws  Effective,  85 ; 
No  Power  to  Regulate  Commerce,  69  ; 
Powers  Should  Not  Be  Curtailed,  86  ; 
Power's  of  States  and  Nation ....  128 

States,  Laws  on  Railways,  299  ;  Affect 
Interstate  Commerce,  124 ;  Contrast 
with  National  Regulation,  71 ;  Ina- 
bility to  Regulate  Railways,  124, 
301;  Jurisdiction  Over  Railways.  .67 

States'  Rights  Doctrine,  Its  Origin .  108 

Standard  Oil  Company,  How  Consti- 
tuted, 48  ;  Services  Rendered  by, .  .267 

Stebbins,  A.  T.     Discussion 336 

Stock     Ownership,     Abolition     of,     No 
Remedy   for    Consolidations    Already 
Effected,   88;   Basis  of  Modern  Com- 
binations, 47  ;  Should  Be  Prohibited, 

50 

Stone,  Warren  S.     Discussion.  . .  .392 

Strikes  Always  Disastrous 415 

Surplus  Products  Lead  to  Formation 
of  Trusts. . 449 

Supreme  Court,  Decisions  on  Power  to 
Regulate   Commerce 355 

Supreme  Court,  Jurisdiction  Over  State 
Legislation    76-83 

Swollen  Fortunes  Result  of  Tariff.. 443 

Tariff,  "Is  the  Tariff  the  Mother  of 
Trusts,"  Byron  W.  Holt 435-445 


470 


INDEX. 


Tariff,  Aids  Trusts,  141,  150,  448; 
Commission  Proposed,  143  ;  Involves 
Limited  Competition,  268 ;  Limits 
Production,  447  ;  Makes  Swollen  For- 
tunes, 443  ;  Not  Sole  Cause  of  Trusts, 

164 

Taussig,  F.  W.  Address,  374-370 ; 
Resolution  by   372 

Taxation  as  a  Trust  Remedy 197 

Taylor,  Robert.     Discussion 430 

Tomlinson,  John  W.  Address,  84-87  ; 
Resolution  by    287 

Tompkins,  D.  A.  Address,  298-301  ; 
Discusses  Resolutions,  462  ;  Offers 
Resolution 302 

Transportation  Rates.  "Regulation  of 
Transportation  Rates."  Robert  Ma- 
ther    272-278 

See  also  Railroads. 

Trade  Associations,  Aim  to  Regulate 
Competition,  270 ;  in  Europe,  306 ; 
Necesssary 332 

Trade  Organization  Agreements  Bene- 
ficial, 259 ;  but  Illegal  Under  Sher- 
man Act 259 

Irattman,  James  F.     Resolutions  by, 

370 

Traxler,  Charles  J.  Address,  319- 
331 ;  Resolution  by 371 

Tripp,  Bartlett.     Address.  .  .  .128-140 

Trusteeship  Involved  in  Commercial 
Power 293 

Trusteeship  Proper  Attitude  for 
Trusts    255 


Trusts.  "Shall  Federal  Jurisdiction 
Be  Extended  in  the  Solution  of  the 
Trust  Problem?"  John  W.  Tomlin- 
son,  84-87;  "Trust  Situation,"  J.  W. 
Jenks,   148-157  ;   "Trust   Problem,"  I. 

N.  Seligman    159-170 

See  also   Special  Topics. 
Uniform       Control       Over       Commerce 

Foundation  of  the  Union 298 

Uniformity  in  State  Laws  Needed.. 243 
United     Gas     Improvement     Company, 

How    Constituted 48 

United   States  Steel  Corporation,   How 

Constituted    47 

Unregulated  Competition  an  Evil.. 271 

Unwise  Laws  Disastrous 147 

Vogel,  August  H.    Discussion.  ..  .118 
Wallace,    J.     H.      Discusses    Resolu- 
tions     • 460 

Wakeman,  Wilbur  F.     Discussion, 

445,  450 
Wealth  of  U.  S.  in  Hands  of  People, 

224 
Webster,    Daniel,    on    Power    to   Regu- 
late  Commerce 69 

Westerfield,  S.     Discussion 426 

Western    Union    Telegraph    Company, 

How    Constituted 49 

Williams,  Talcott.  .  Discusses  Reso- 
lutions    458 

Wilson  Tariff  Act,  Trust  Formed  Un- 
der     439 

Wisconsin,  Law  on  Public  Utilities.  157 
Wooten,  Thomas   V.    Discussion.  .316 
Yellow  Pine   Manufacturers   Seek  Rea- 
sonable   Combination 337 

Ziebold,  Charles  F.    Address.  107-114 


471 


1H»9B HI 


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